Opposing firm-level responses to the China shock: output competition versus input supply
Philippe Aghion, Antonin Bergeaud, Matthieu Lequien, Marc J. Melitz and Thomas Zuber
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 in low-productivity firms. On the other hand, the impact of the input supply shock is reversed.
1 May 2024
American Economic Journal: Economic Policy 16(2) , pp.249-269, 2024
https://www.aeaweb.org/articles?id=10.1257/pol.20210753
This Journal article is published under the centre's Growth programme.