Import Competition and Firms' Internal Networks
62 Pages Posted: 14 Aug 2021 Last revised: 10 Dec 2021
Date Written: December 1, 2021
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.
Keywords: China shock, import competition, multisector firms, network propagation, trade.
JEL Classification: D22, F14, F40
Suggested Citation: Suggested Citation