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Opposing Firm-Level Responses to the China Shock: Output Competition versus Input Supply

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  • Philippe Aghion

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CdF (institution) - Collège de France)

  • Antonin Bergeaud

    (HEC Paris - Ecole des Hautes Etudes Commerciales)

  • Matthieu Lequien

    (INSEE - Institut national de la statistique et des études économiques (INSEE))

  • Marc Melitz

    (Harvard University)

  • Thomas Zuber

    (Banque de France - Banque de France - Banque de France)

Abstract

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.

Suggested Citation

  • Philippe Aghion & Antonin Bergeaud & Matthieu Lequien & Marc Melitz & Thomas Zuber, 2024. "Opposing Firm-Level Responses to the China Shock: Output Competition versus Input Supply," PSE-Ecole d'économie de Paris (Postprint) halshs-04798529, HAL.
    • Handle: RePEc:hal:pseptp:halshs-04798529
    DOI: 10.1257/pol.20210753
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    Cited by:

    1. Hoyos, Mateo & Coronado, José Alejandro & Martins, Guilherme Klein, 2024. "Local and Spillover Effects of Trade on Structural Transformation: Evidence from Brazil," SocArXiv rfqvt_v1, Center for Open Science.

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