Trade as an engine of creative destruction: Mexican experience with Chinese competition

Iacovone, Leonardo, Rauch, Ferdinand and Winters, L Alan (2013) Trade as an engine of creative destruction: Mexican experience with Chinese competition. Journal of International Economics, 89 (2). pp. 379-392. ISSN 0022-1996

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Abstract

This paper exploits the surge in Chinese exports from 1994 to 2004 to evaluate the effects of a competition shock from a low wage competitor for producers in an important middle-income country, Mexico. We find that this shock causes selection and reallocation at both firm and product levels and that its impact is highly heterogeneous at the intensive and extensive margins. Sales of smaller plants and more marginal products are compressed and are more likely to cease, whereas those of larger plants and core products seem relatively impervious to the shock. This implies a reallocation in terms of market shares within firms and between firms. We also show that the impact of expanded access to cheaper Chinese intermediate inputs has a similar effect, with larger plants benefiting more from the availability of cheaper imported inputs.

Item Type: Article
Additional Information: Online First Article
Keywords: Competition; Trade; Firm-heterogeneity; Product-Level; Firm-Level; Mexico; China
Schools and Departments: School of Business, Management and Economics > Economics
Subjects: H Social Sciences > HF Commerce > HF1014 Balance of trade
H Social Sciences > HF Commerce > HF1021 Commercial geography. Economic geography
H Social Sciences > HF Commerce > HF1701 Tariff. Free trade. Protectionism
Depositing User: L.Alan Winters
Date Deposited: 24 Sep 2012 09:36
Last Modified: 07 Mar 2017 07:28
URI: http://sro.sussex.ac.uk/id/eprint/40803

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