Low-Cost Import Competition: Do Small Firms Respond Differently?
10 Pages Posted: 14 Apr 2010
Date Written: April 1, 2010
We investigate the impact of import competition from low-cost countries on the exit of domestic firms from the manufacturing industries of eight European countries. We find a significant positive impact on the exit of large firms, while small firms are not directly affected. The empirical evidence is consistent with small firms having a comparative advantage in terms of flexibility and niche-filling capabilities, on a narrower relevant geographic market.
Keywords: globalization, low-cost import competition, firm exit
JEL Classification: F14, L25, L6
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