Heterogeneous Responses to Competitive Shocks: Firm-level Evidence from Chile

CÉSAR, ANDRÉS; FALCONE, GUILLERMO ENRIQUE

Bariloche

Congreso; LII Asociación Argentina de Economía Política; 2017

This paper empirically characterizes firm-level responses to a competitiveshock given by rising import competition from China. We use microdata onthe universe of Chile?s manufacturing firms during 1995-2006. For identificationwe exploit the fact that Chinese import penetration (CIP) increased differentlyover time across manufacturing industries. We use chinese export growth inhigh-income industry-country pairs as instruments for CIP. Average CIP acrossindustries increased from 1.5% in 1995 to 10.1% in 2006. Our results suggest thatfirms in industries more exposed to rising CIP dismiss more workers, reduce theirsales and face a higher probability of exiting the market relative to comparablefirms in less exposed industries. All these effects are less pronounced for moreproductive firms.