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When Time Matters: Eastern Europe's Response to Chinese Competition

Andrea Ciani and Karsten Mau ()

No 7, Research Memorandum from Maastricht University, Graduate School of Business and Economics (GSBE)

Abstract: This paper presents evidence in support of a novel source of comparative advantage that arises from geographic proximity between trading partners and differential importance of timely delivery across industries (i.e. time-sensitivity). To test this channel, we investigate adjustments to Chinese export competition by a group of Eastern and Southeastern European (ESE) countries within EU15 destination-product markets. We rely on instrumental variables to extract exogenous variation in the expansion of Chinese export supply capacity across products and destinations. While finding sizable displacements effects materializing in terms of both export revenues and quantities, they appear to be about 50 percent smaller for time-sensitive exports. We further show that distance between trade partners determines this differential effect. Results based on firm-level customs data for a single ESE country support these findings. Overall, we observe that geographic proximity can shield firms from external competition in specific industries.

JEL-codes: F14 F15 F61 L25 (search for similar items in EconPapers)
Date: 2020-03-03
New Economics Papers: this item is included in nep-gen and nep-int
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DOI: 10.26481/umagsb.2020007

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