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Trade as an engine of creative destruction: Mexican experience with Chinese competition

Leonardo Iacovone (), Ferdinand Rauch () and L. Winters

Journal of International Economics, 2013, vol. 89, issue 2, 379-392

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.

Keywords: Competition; Trade; Firm-heterogeneity; Product-level; Mexico; China (search for similar items in EconPapers)
JEL-codes: D22 F14 F15 L25 (search for similar items in EconPapers)
Date: 2013
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Related works:
Working Paper: Trade as an Engine of Creative Destruction: Mexican Experience with Chinese Competition (2010) Downloads
Working Paper: Trade as an engine of creative destruction: Mexican experience with Chinese competition (2010) Downloads
Working Paper: Trade as an Engine of Creative Destruction Mexico experience with Chinese competition (2010) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:89:y:2013:i:2:p:379-392

DOI: 10.1016/j.jinteco.2012.09.002

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