Opposing firm-level responses to the China shock: Output competition versus input supply
Publication information:
Aghion, Phillipe, Antonin Bergeaud, Matthieu Lequien, Marc J. Melitz, and Thomas Zuber. n.d. “Opposing Firm-Level Responses to the China Shock: Output Competition versus Input Supply”. American Economic Journal: Economic Policy.
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.
JEL classification: F14, O19, O31, O33, O34
Keywords: Competition shock, patent, firms, import
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.
JEL classification: F14, O19, O31, O33, O34
Keywords: Competition shock, patent, firms, import