Research

This paper studies how the impact of a trade shock depends on a country's production structure and its position in the global supply chain. I decompose the effect of China's WTO accession on Indian manufacturing into two channels - direct output competition and higher intermediate input availability. The input channel dominates, in part driven by the fact that Indian manufacturers were predominantly buyers of Chinese intermediates rather than competitors in final-goods markets at the time of the shock. Using district-level data and a shift-share IV methodology, I find that a 1 standard deviation higher exposure to Chinese inputs per worker slows the decline of the manufacturing employment share by 0.62 percentage points. Disaggregating employment by sub-sectors, I show that the direct competition effect is concentrated in the intermediate goods sectors. To quantify aggregate welfare and employment effects, I construct a quantitative trade model with input-output linkages in production. The model implies moderate welfare gains, with higher gains in more industrial states reliant on China-shocked sectors for inputs.

This paper investigates international spillovers of Chinese industrial policy (IP), driven by Chinese policy objectives of reaching the technology frontier in manufacturing, and achieving energy and supply chain independence. We focus on the shipbuilding, solar panels and electric vehicle industries, exploiting the differential vertical-linkage of industries to these sectors and cross-country differences in production technology and value chains. In all of these industries, at the forefront of precision and advanced manufacturing, China has captured an increasing share of value added across countries, replacing domestic upstream production. Using a difference-in-differences methodology with COMTRADE and the OECD's Trade in Value Added data, we find persistent negative effects on output and employment in competing industries in peer countries such as Japan and South Korea. We also find evidence of declining export market shares and value-chain participation in other advanced industrial nations, including the US, Germany, France and the UK.

This paper investigates how Indian firms adjusted to the China Shock, decomposing its impact into direct output competition and intermediate input availability effects across three key margins: product-switching, firm-level sales (intensive), and firm exit/entry (extensive). We find that firms exposed to higher output competition adapted by pivoting their product baskets toward downstream consumer goods, while all firms, including those with higher input availability, saw a decrease in overall R&D spending. We rationalize these results by extending the Klette-Kortum model of multi-product firm innovation to allow firms to optimize the size and composition of their product basket in response to an asymmetric trade shock. Using product-level output data to estimate the structural model, we estimate the aggregate productivity and welfare effect of the China Shock in India that can be attributed to firms' ability to pivot to new product markets.