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Opposing firm-level Responses to the China Shock: Horizontal Competition Versus Vertical Relationships?

Author

Listed:
  • Philippe Aghion
  • Antonin Bergeaud
  • Matthieu Lequien
  • Marc Melitz
  • Thomas Zuber
Abstract
We decompose the “China shock” into two components that induce different adjustments for firms exposed to Chinese exports: an output shock affecting firms selling goods that compete with similar imported Chinese goods, and an input supply 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 output 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 input supply shock on firms’ sales, employment and innovation.

Suggested Citation

  • Philippe Aghion & Antonin Bergeaud & Matthieu Lequien & Marc Melitz & Thomas Zuber, 2021. "Opposing firm-level Responses to the China Shock: Horizontal Competition Versus Vertical Relationships?," NBER Working Papers 29196, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29196
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    Cited by:

    1. David Autor & David Dorn & Gordon Hanson, 2021. "On the Persistence of the China Shock," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 52(2 (Fall)), pages 381-476.
    2. Dorn, David & Levell, Peter, 2021. "Trade and Inequality in Europe and the US," CEPR Discussion Papers 16780, C.E.P.R. Discussion Papers.
    3. Bergeaud, Antonin & Schmidt, Juliane & Zago, Riccardo, 2022. "Patents that match your standards: firm-level evidence on competition and innovation," LSE Research Online Documents on Economics 118031, London School of Economics and Political Science, LSE Library.
    4. Olimpia Cutinelli Rendina, 2023. "Lobbying or Innovation: Who Does What Against Foreign Competition," Working Papers halshs-03970033, HAL.
    5. Akira Sasahara, 2022. "The Empirics of the China Trade Shock: A Summary of Estimation Methods and A Literature Review," Keio-IES Discussion Paper Series 2022-008, Institute for Economics Studies, Keio University.
    6. Olimpia Cutinelli Rendina, 2023. "Lobbying or Innovation: Who Does What Against Foreign Competition," PSE Working Papers halshs-03970033, HAL.

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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F6 - International Economics - - Economic Impacts of Globalization
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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