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

Philippe Aghion, Antonin Bergeaud, Matthieu Lequien, Marc Melitz and Thomas Zuber

CEP Discussion Papers from Centre for Economic Performance, LSE

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.

Keywords: competition shock; patent; firms; import (search for similar items in EconPapers)
Date: 2021-08-09
New Economics Papers: this item is included in nep-bec, nep-cna, nep-com, nep-ino, nep-int and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Working Paper: Opposing firm-level responses to the China shock: horizontal competition versus vertical relationships (2021)
Working Paper: Opposing firm-level Responses to the China Shock: Horizontal Competition Versus Vertical Relationships? (2021)
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