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Opposing firm-level responses to the China shock: horizontal competition versus vertical relationships

Aghion, Philippe, Bergeaud, Antonin, Lequien, Matthieu, Melitz, Marc J. and Zuber, Thomas (2021) Opposing firm-level responses to the China shock: horizontal competition versus vertical relationships. CEP Discussion Papers (1787). Centre for Economic Performance, LSE, London, UK.

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Abstract

We decompose the "China shock" into two components that induce different adjustments for firms exposed to Chinese exports: a horizontal shock affecting firms selling goods that compete with similar imported Chinese goods, and a vertical shock affecting firms using inputs similar to the imported Chinese goods. Combining French accounting, customs, and patent information at the firm-level, we show that the horizontal shock is detrimental to firms' sales, employment and innovation. Moreover, this negative impact is concentrated on low-productivity firms. By contrast, we find a positive effect - although often not significant - of the vertical shock on firms' sales, employment and innovation.

Item Type: Monograph (Discussion Paper)
Official URL: https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information: © 2021 The Authors
Divisions: Centre for Economic Performance
Economics
Subjects: H Social Sciences > HG Finance
H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HC Economic History and Conditions
JEL classification: F - International Economics > F1 - Trade > F14 - Country and Industry Studies of Trade
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O19 - International Linkages to Development; Role of International Organizations
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O31 - Innovation and Invention: Processes and Incentives
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O33 - Technological Change: Choices and Consequences; Diffusion Processes
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O34 - Intellectual Property Rights: National and International Issues
Date Deposited: 03 Mar 2022 15:15
Last Modified: 04 Mar 2022 00:03
URI: http://eprints.lse.ac.uk/id/eprint/113915

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