Department of Economics and Business Economics

Chinese competition: intra-industry and intra-firm adaptation

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This paper quantifies how a small and open economy adapts and thereby shapes to what extent it is exposed to competition from China on the world market. Starting from granular firm-commodity-destination-level sales data for the universe of Danish manufacturing firms we construct counterfactual competition exposure, measured as sales weighted Chinese import shares in the home and all export markets while holding the industry composition, the product as well as the destination mix constant. Without adaptation the competition shock after China’s WTO accession would have been more than one and a half times of what has been readily observable. Besides broad industry-level structural change, intra-industry reallocations and intra-firm adjustments through product and destination switching are important adaptation channels. Furthermore, we find some evidence for dynamic quality differentiation as a relevant adaptation margin.

Original languageEnglish
JournalReview of World Economics
Volume155
Issue2
Pages (from-to)327-352
Number of pages26
ISSN1610-2878
DOIs
Publication statusPublished - 2019

    Research areas

  • ADJUSTMENT, China, Competition exposure, IMPACT, IMPORT COMPETITION, Import competition, MULTIPRODUCT FIRMS, PRODUCT QUALITY, Product similarity, Structural change, TRADE

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