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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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Identification Number: 10.1016/j.jinteco.2012.09.002

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
Official URL: http://www.sciencedirect.com/science/article/pii/S...
Additional Information: © 2013 Elsevier B.V.
Divisions: LSE
Subjects: H Social Sciences > H Social Sciences (General)
Date Deposited: 01 Jul 2014 12:01
Last Modified: 20 Sep 2019 01:46
Projects: RES-107-28-0001
Funders: World Bank's Research Support Budget, Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/57269

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