Import Competition and Firms' Internal Networks
September 2021
Working Paper Number:
CES-21-28
Abstract
Using administrative data on U.S. multisector firms, we document a cross-sectoral propagation of the import competition from China ('China shock') through firms' internal networks: Employment of an establishment in a given industry is negatively affected by China shock that hits establishments in other industries within the same firm. This indirect propagation channel impacts both manufacturing and non-manufacturing establishments, and it operates primarily through the establishment exit. We explore a range of explanations for our findings, highlighting the role of within-firm trade across sectors, scope of production, and establishment size. At the sectoral aggregate level, China shock that propagates through firms' internal networks has a sizable impact on industry-level employment dynamics.
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manufacturing,
enterprise,
industrial,
import,
export,
manufacturer,
merger,
acquisition,
sector,
establishment,
factory,
multinational,
spillover,
sectoral,
externality
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