Who Benefits from the Decline of American Manufacturing? Evidence from 142,663 Foreign and Domestic Entries in China

89 Pages Posted: 27 Dec 2018

See all articles by Minwen Li

Minwen Li

Tsinghua Universitiy - School of Economics and Management

Tanakorn Makaew

Securities and Exchange Commission (SEC)

Vojislav Maksimovic

University of Maryland - Robert H. Smith School of Business

Date Written: December 9, 2018

Abstract

Using the establishment of U.S.-China Permanent Normal Trade Relation as a plausibly exogenous shock, we study the effect of trade liberalization on domestic entrepreneurial entry and new foreign firms in China. The positive effect on entry rate is concentrated among foreign firms. Foreign entrants’ export propensity is more responsive to trade shock. Domestic entrants’ export propensity varies with local financial development. Foreign entrants are less financially constrained and grow faster, especially in undeveloped areas. Our results suggest that in emerging markets, trade globalization may in the first instance benefit foreign investors rather than domestic firms and entrepreneurs.

Keywords: Globalization, International Trade, Trade War, Export, Financial Development, Financial Constraint, Entrepreneurship, China

JEL Classification: F13, F23, F61, G15, G32, L26

Suggested Citation

Li, Minwen and Makaew, Tanakorn and Maksimovic, Vojislav, Who Benefits from the Decline of American Manufacturing? Evidence from 142,663 Foreign and Domestic Entries in China (December 9, 2018). Available at SSRN: https://ssrn.com/abstract=3298502 or http://dx.doi.org/10.2139/ssrn.3298502

Minwen Li (Contact Author)

Tsinghua Universitiy - School of Economics and Management ( email )

324 Weilun Building
nagement
Beijing, 100084
China
(86)10-62793685 (Phone)

Tanakorn Makaew

Securities and Exchange Commission (SEC) ( email )

450 Fifth Street, NW
Washington, DC 20549-1105
United States

Vojislav Maksimovic

University of Maryland - Robert H. Smith School of Business ( email )

Van Munching Hall
College Park, MD 20742-1815
United States
301-405-2125 (Phone)
301-314-9157 (Fax)

HOME PAGE: http://scholar.rhsmith.umd.edu/vmax/home

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