Research
Working Papers
Foreign Competition and Skill Premium: The Effect of Chinese Competition on Mexican Firms, with Mauro Caselli (University of Trento)
Abstract: This paper analyses the effect of rising competition from Chinese exports on the skill premium of Mexican plants. Using detailed product-plant-level production data from Mexico and bilateral product-level trade data for 1994-2007, we provide evidence that Mexican plants reduce their skill premium in response to increasing competition from Chinese exports, and the effect is more pronounced among non-exporting plants. Thus, we develop a model linking competition and wage inequality between skilled and unskilled workers by introducing these two types of labour to a model with heterogeneous firms and quality differentiation. Our model predicts that tougher competition leads plants to downgrade quality, which induces a decline in the wage difference between skilled and unskilled workers. We investigate this hypothesis empirically by analysing the effect of Chinese competition on the product quality of Mexican plants. Consistent with the fall in the skill premium, we document a downgrading impact of China's rise on Mexican plants' product quality and this quality downgrading is less intense for products sold in the foreign market. These findings provide empirical support for the predictions of our model.
Abstract: This paper studies how Asian developing countries respond to the rise of China in the US market using product-level bilateral trade data from BACI-CEPII dataset for the period from 1995 to 2015. In particular, I investigate the effect of competition from rising China's exports on value, quantity, and quality of exports from Asian developing countries in the US market. I find robust evidence that Chinese competition has a non-negative effect on value and quantity of exports from Bangladesh, Vietnam, and Sri Lanka but a negative effect on exports from Indonesia, Malaysia, Philippines, India, Pakistan, and Thailand. This difference in the effects on value and quantity of exports might arise from the difference in response with respect to product quality. All countries upgrade product quality when facing tougher competition from China and more so for their comparative advantage products or products where China has a comparative advantage, but the rate of quality upgrading is higher for Bangladesh, Vietnam, and Sri Lanka. I also find that greater competitive pressure from China's exports leads to more quality upgrading for products close to the world quality frontier for Bangladesh, Vietnam, and Sri Lanka and for short-ladder products for Indonesia, Malaysia, Philippines, India, Pakistan, and Thailand.
Global Value Chains and Productivity: Micro Evidence from Estonia - IMF Working Paper No. 20/117, with Philippe Wingender and Cheikh A. Gueye
Abstract: We explore empirically the impact of GVC participation on productivity in Estonia using firm-level data from 2000 to 2016. We find that higher GVC participation at the industry level significantly boosts productivity at both the industry and the firm level. Frontier firms, large firms, and exporting firms also benefit more from GVC participation than non-frontier firms, small firms, and non-exporting firms. We also find that GVC participation of downstream industries has a negative correlation with productivity. Frontier firms and large firms benefit more from GVC participation of upstream industries, while non-frontier firms and small firms benefit more from GVC participation of downstream industries. Our results suggest that policies designed to promote participation in GVCs are important to raise aggregate productivity and potential growth in Estonia.