Survival of the Best Fit: Exposure to Low-Wage Countries and the (Uneven) Growth of U.S. Manufacturing Plants
Paper No' CEPDP0584:
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Keywords: Low-Wage Country Import Competition; Heckscher-Ohlin, Manufacturing Plant
JEL Classification: F11; F14 ; L25; L60
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This Paper is published under the following series:
CEP Discussion Papers
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This paper examines the role of international trade in the reallocation of U.S. manufacturing
activity within and across industries from 1977 to 1997. It introduces a new measure of
industry exposure to international trade, motivated by the Heckscher-Ohlin model, which
focuses on where imports originate rather than their overall level. Results demonstrate that
plant survival as well as output and employment growth are negatively associated with the
share of industry imports sourced from the world ¿s lowest-wage countries. Within industries,
activity is reallocated towards capital- intensive plants. Plants are also more likely to alter
their product mix (i.e. switch industries) in response to trade with low-wage countries. Plants
altering their product mix switch to industries that are more capital and skill- intensive.