Trade liberalization in textiles: Policy effects in an import-competing industry

Patrick Conway

Journal of Policy Modeling, 2009, vol. 31, issue 5, 664-680

Abstract: I trace the dynamic impact of removal of textile quotas in the US on output, employment and plant closure in that industry. A dynamic theoretical model of firm-level decision-making is estimated with US Census manufacturing data and with industry-level demand-side data. Simulations performed with the estimated model provide a decomposition of the historical record into parts attributable to import competition, to technological progress, and to a secular real-wage increase. Plant closure and a fall in domestic prices are largely associated with technological progress, while downsizing, layoffs and reduction in domestic market share are associated with trade liberalization. The market-clearing domestic price of textiles is identified as a crucial channel in transmitting technology or import price shocks to layoffs and plant closure.

Keywords: Plant; closure; Downsizing; Layoffs; Import; competition; Technological; progress (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:31:y:2009:i:5:p:664-680

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