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Adjusting to Globalization: The Americas Perspective
Saturday, Jan. 5, 2019
8:00 AM - 10:00 AM
Latin American and Caribbean Economic Association
Harvard Business School
Import Competition, Quality Upgrading and Exporting: Evidence from the Peruvian Apparel Industry
This paper studies quality upgrading to escape competition from low-wage countries. Informed by Peruvian apparel manufacturers reaction to China's WTO accession, I propose a new channel that does not rely on access to new inputs or markets. I introduce factor specificity in a multi-product firm model and show that a profitability loss due to competition in low-quality segments can induce firms to quality upgrade. With costly downsizing, firms reallocate idle factors across products and markets. Gains from this channel are large. Quality upgrading raised annual sales and employment by 17.5% and 18% relative to a counterfactual with no upgrade opportunities.
The Impact of Asian Competition on Mexican Labor Outcomes
In this study, we examine the impact of Asian import competition, in particular from China, on Mexican labor outcomes between 1998 and 2013. We found that the adjustment in the labor force took various forms: a decline in the number of paid employees, a substitution of some paid employees by contract workers, and a substitution of some paid employees that are hired legally by paid employees that are hired illegally. We find that the shrinkage in the level of employment was met by an increase in the population that exit the labor force. Among the paid employees, we found that the negative impact was 3 times more severe on production workers than on non-production workers, indicating that workers with lower skills were affected more severely. This is confirmed with additional findings indicating that non-college manufacturing workers experienced the main negative effects. Overall, the impact of Chinese competition on Mexican labor outcomes at the national level were relatively moderate, but the effects were heterogeneous across regions and across different types of labor. The latter suggests that the design of any trade assistance policy should consider such heterogeneity issues carefully.
Outsourcing Innovation: The China Shock Hits Brazil
In this paper we investigate the roles played by China´s world trade expansion on the productivity growth and innovation adoption by Brazilian firms. We use firm-level panel data from 1998-2011 with information on innovations and trade. The innovation survey provides detailed information regarding the process and type of innovations (product, process, organization and marketing). The trade data provide firm and sector-level information on imports from China. We use the share of total imports that come from China in the other South American countries by sector as instruments for the Chinese import intensity in Brazil. We find a positive effect of firm and sector-level imports from China on firm productivity. At the same time, the effect of Chinese imports on innovation and employment is negative, also for firms who source inputs from China. While outsourcing inputs and innovation seems to increase productivity in the short-run, and help smaller firms catch up, however, there is a risk that this may have negative consequences for innovation in the long-run.
Managing Trade in China and the United States
Management practices and participation in international trade vary substantially across firms and countries. We provide the first evidence on the links between managerial competence, export performance and import activity using detailed data on the management practices, balance sheets and customs transactions of 485 Chinese firms in 1999-2008 and over 10,000 US firms in 2010. Better managed firms are more likely to export, sell more products to more markets, and have higher export sales. Management plays a distinct role from TFP and is disproportionately more important for exporting than for overall output. Better managed Chinese firms charge higher export prices within narrow destination-product markets, but do not sell higher quantities. By contrast, better managed US firms sell higher quantities within narrow destination-product markets, but do not charge higher prices. Better managed firms in both China and the US use more imported inputs and import more expensive inputs from more and richer countries of origins. These results suggest that superior managerial practices enhance firms’ trade performance by allowing them to more efficiently produce more complex goods of higher quality, but that US and Chinese firms operate at different segments of the quality distribution. Inferior managerial practices may thus be an important obstacle for developing nations that depend on trade for economic growth.
F6 - Economic Impacts of Globalization