Chinese competition and network effects on the extensive margin

Daniel Goya

No 2019-01, Working Papers from Escuela de Negocios y Economía, Pontificia Universidad Católica de Valparaíso

Abstract: I construct a network of input-output linkages in Chilean manufacturing and show that a negative demand shock has an impact on the number of firms producing in sectors that supply the sectors affected by the shock. Approximately one-third of the effect of increased Chinese competition on the extensive margin can be attributed to these network effects. The observed effect is a combination of multiproduct firms dropping varieties and firms leaving the market. I also study whether there is evidence of 'cascading failures' that could amplify the impact of idiosyncratic shocks. I find no evidence of these 'cascading effects'.

Keywords: production networks; extensive margin; propagation of shocks; input-output; Chinese competition. (search for similar items in EconPapers)
JEL-codes: D57 F60 L25 (search for similar items in EconPapers)
Date: 2019-02
New Economics Papers: this item is included in nep-com, nep-net, nep-tra and nep-ure
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Citations: View citations in EconPapers (1)

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