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

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

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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)
JEL-codes: F14 O19 O31 O33 O34 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2021-08-09
New Economics Papers: this item is included in nep-bec, nep-cna, nep-com, nep-ino, nep-int, nep-reg and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://eprints.lse.ac.uk/113915/ Open access version. (application/pdf)

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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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:113915

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