Does Competing with Chinese Products Enhance the Productivity of Surviving Plants? Evidence from the Chilean Manufacturing Sector

Abstract

In this paper I analyze if competition with Chinese products increased plant productivity in the manufacturing sector of Chile during 1995-2006. I find evidence suggesting that during this period Chilean manufacturing plants that remained producing and were exposed to competition from Chinese products were more productive than exiting plants. However, I do not find that plants increased their productivity over time due to competition with Chinese products. The productivity differential with Chinese products between exiting and surviving plants with China may then be attributed to a level of efficiency of these plants prior to the onset of Chinese product competition. As a result, I find that plants are not improving due the Chinese competition but it is those plants that are productive enough the ones that manage to survive.