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

ANDRÉS CÉSAR; FALCONE, GUILLERMO ENRIQUE

Guayaquil

Congreso; XXIII Reunión Anual LACEA LAMES 2018; 2018

This paper empirically characterizes the short-term firm-level responses to acompetitive shock given by rising import competition from China. We use microdata on the universe of Chile´s manufacturing rms during 1995-2006. For identication we exploit the fact that Chinese import penetration (CIP) increased differently over time across manufacturing industries. We use Chinese export growth in high-income industry-country pairs as instruments for CIP. Average CIP across industries increased from 1.5% in 1995 to 9.9% in 2006. Our results suggest that firms in industries more exposed to rising competition from China dismiss more workers, reduce their sales and face a higher probability of exiting the market relative to comparable firms in less exposed industries of the same sector. All these effects are less pronounced for more productive firms.