The pro-competitive effect of imports from China: an analysis of firm-level price data

Matteo Bugamelli, Silvia Fabiani () and Enrico Sette

No 737, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: The entry of China into world markets has been one of the strongest recent shocks to world trade and advanced countries. industrial sectors. This is particularly true for Italy where labour-intensive, low-technology production represents a large share of output. Using Italian manufacturing firm-level data on output prices over the period 1990-2006, we test whether increased import competition from China has affected firms� pricing strategies causing a reduction in the dynamics of prices and markups. After controlling for other price determinants (demand and cost, domestic competition and import penetration), we find that this is indeed the case. Comparing China�s share of world exports to Italy with China�s total world export market share proves the causal nature of the relationship we find. Inspired by and in line with recent advances in the literature on international trade, we also show that the price effects of Chinese competitive pressures are stronger in less technologically advanced sectors and, within these sectors, on smaller firms.

Keywords: import competition; China; firms' prices and productivity (search for similar items in EconPapers)
JEL-codes: E31 F14 F15 L2 (search for similar items in EconPapers)
Date: 2010-01
New Economics Papers: this item is included in nep-com, nep-eff and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (43)

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