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The Spatial Dimension of Import Competition

Gullstrand, Joakim LU and Knutsson, Polina LU (2019) In Working Papers
Abstract
Exposure to international competition on a country level has been shown to improve the efficiency of domestic producers. We contribute to this literature by assessing whether the distance between producers and importers, within a country, matters for import competition effects at product level. Using detailed geographical information about the location of all manufacturing firms in Sweden during the period 2005–2014, we find strong evidence of an increased efficiency in the domestic production when imports surge, but that the effect diminishes with the distance between the producer and the importer. In addition to the importance of the geographical pattern within a country, we find that the average effect of import competition conceals... (More)
Exposure to international competition on a country level has been shown to improve the efficiency of domestic producers. We contribute to this literature by assessing whether the distance between producers and importers, within a country, matters for import competition effects at product level. Using detailed geographical information about the location of all manufacturing firms in Sweden during the period 2005–2014, we find strong evidence of an increased efficiency in the domestic production when imports surge, but that the effect diminishes with the distance between the producer and the importer. In addition to the importance of the geographical pattern within a country, we find that the average effect of import competition conceals large variations across firms and products. Highly productive firms respond to import competition by further improving efficiency, which, in turn, is transmitted to both a lower price and a higher markup. Firms are also more likely to drop fringe products while keeping core ones. Products undercut by low import prices in their proximity respond by lowering prices only, although highly efficient products resist this by a more pronounced improvement in the marginal cost, which, in turn, is transmitted to both a lower price and a higher markup. (Less)
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Working Paper
publication status
published
subject
keywords
Import competition, distance, firm-product performance, F14
in
Working Papers
issue
2019:13
pages
43 pages
language
English
LU publication?
yes
id
a79dd9fa-1e66-4548-8b73-c60db30ce79c
alternative location
https://swopec.hhs.se/lunewp/abs/lunewp2019_013.htm
date added to LUP
2019-09-16 14:45:34
date last changed
2019-09-17 11:16:42
@misc{a79dd9fa-1e66-4548-8b73-c60db30ce79c,
  abstract     = {Exposure to international competition on a country level has been shown to improve the efficiency of domestic producers. We contribute to this literature by assessing whether the distance between producers and importers, within a country, matters for import competition effects at product level. Using detailed geographical information about the location of all manufacturing firms in Sweden during the period 2005–2014, we find strong evidence of an increased efficiency in the domestic production when imports surge, but that the effect diminishes with the distance between the producer and the importer. In addition to the importance of the geographical pattern within a country, we find that the average effect of import competition conceals large variations across firms and products. Highly productive firms respond to import competition by further improving efficiency, which, in turn, is transmitted to both a lower price and a higher markup. Firms are also more likely to drop fringe products while keeping core ones. Products undercut by low import prices in their proximity respond by lowering prices only, although highly efficient products resist this by a more pronounced improvement in the marginal cost, which, in turn, is transmitted to both a lower price and a higher markup.},
  author       = {Gullstrand, Joakim and Knutsson, Polina},
  keyword      = {Import competition,distance,firm-product performance,F14},
  language     = {eng},
  note         = {Working Paper},
  number       = {2019:13},
  pages        = {43},
  series       = {Working Papers},
  title        = {The Spatial Dimension of Import Competition},
  year         = {2019},
}