Increased Import Competition Research Articles

The Effect of Ownership and Competitive Pressure on Firm Performance in Transition Countries: Micro Evidence from Bulgaria, Romania and Poland

This paper uses a unique representative firm level data set to analyse the effect of domestic and international competitive pressure and ownership changes in three emerging economies, Bulgaria Poland and Romania. Our main findings can be summarized as follows: Domestic competitive pressure, measured by market structure, and increased import penetration are associated with higher firm performance in Poland irrespective of the ownership structure of firms. Furthermore the positive effects of increased import competition are reinforced for foreign owned firms. In contrast, in Bulgaria and Romania, increased import penetration is associated with lower firm performance, while there is some evidence that more competitive market structures are associated with higher total factor productivity. However, these effects depend on the ownership structure of firms, which suggests the existence of complementarities between competitive pressure and ownership changes. The results also indicate that privatisation has positive effects on firm performance. In particular, domestic private firms and foreign owned firms outperform state owned firms. Furthermore, there is evidence that foreign owned firms do better than domestically owned private firms especially in Bulgaria and Poland. The results on ownership are somewhat weaker for Romania.

The Role of Technology in Determining Skilled Employment: An Economywide Approach

This paper compares the role of technological change with that of trade in explaining the increased demand for skilled workers. The paper shows technology has played the dominant role in changing employment patterns in Australia. The finding is consistent across industries, including those having experienced increased import competition. Rising capital intensity of production has also promoted the employment of more highly skilled workers.

Does trade adjustment assistance help trade-displaced workers?

The federal Trade Adjustment Assistance (TAA) program was designed to aid workers who have lost their jobs because of increased import competition. Linear earnings functions provide little evidence that the TAA program increases the subsequent wages of its participants over comparable unemployment insurance (UI) exhaustees. However, adjusting for time spent training, TAA trainees were employed more than comparable non-trainees.

DOES TRADE ADJUSTMENT ASSISTANCE HELP TRADE‐DISPLACED WORKERS?

The federal Trade Adjustment Assistance (TAA) program was designed to aid workers who have lost their jobs because of increased import competition. Linear earnings functions provide little evidence that the TAA program increases the subsequent wages of its participants over comparable unemployment insurance (UI) exhaustees. However, adjusting for time spent training, TAA trainees were employed more than comparable nontrainees.

Shifts in Relative U.S. Wages: The Role of Trade, Technology, and Factor Endowments

A basic relationship of the standard general equilibrium trade model relating product-price changes to factor-price changes is used—together with other economic relationships based on this model—to investigate empirically the importance of changes in trade, technology, and factor endowments in accounting for the shifts in relative wages of less-educated workers compared to more-educated workers from 1967 to 1996. In the early part of the period when wage inequality decreased, the dominant explanatory factor seems to have been a relative increase in the supply of highly educated labor. However, since the late 1970s, none of the three economic forces considered can alone account for the observed changes in relative wages, prices, outputs, net exports, and factor-use ratios. In particular, both education-biased technical progress that was greater in industries that intensively used more-educated labor and increased import competition in industries that intensively used less-educated labor seem to have played...

Product market competition and the industry price–cost markup fluctuations:: role of energy price and monetary changes

We examine the role played by imperfect competition in the response of markups to energy price and monetary changes. We find: (i) for concentrated industries, markups increase with monetary expansion and decrease when energy prices increase; the elasticity with respect to energy prices is greater than monetary changes; (ii) for low concentration industries, markups are virtually unaffected by monetary changes and the energy price elasticities are statistically insignificant; (iii) markups are procyclical over the industry-specific cycle; and (iv) increased import competition lowers markups only in the concentrated industries. The energy price increases (decreases) during the 1970s (1980s) may have been a key factor contributing to the narrowing (widening) of the markup gap between high and low concentration industries. We provide evidence that procyclical markups in concentrated industries are not being driven by differences in the degree of labor hoarding between low and high concentration industries.

International Trade and Productivity Growth: Exploring the Sectoral Effects for Developing Countries

The paper estimates an empirical relation based on Krugman's "technological gap" model to explore the influence of the pattern of international trade and production on the overall productivity growth of a developing country. A key result is that increased import competition in medium-growth (but not in low- or high-growth) manufacturing sectors enhances overall productivity growth. The authors also find that a production-share weighted average of (technological leaders') sectoral productivity growth rates has a significant effect on the rate of aggregate productivity growth. Copyright 2000, International Monetary Fund

Chemopreventive properties of nimesulide, a selective cyclooxygenase-2 inhibitor, against phip-induced mammary carcinogenesis in rats

This paper discusses some macro links that are missing from trade models. A multicountry macroeconometric model is used to analyze the effects on the United States of increased import competition from China, an experiment that is common in the recent trade literature. In the macro story a fall in Chinese export prices is stimulative. Domestic prices fall, which increases real wage rates and real wealth, which increases household expenditures. Trade models do not have these channels, and they likely overestimate the negative effects or underestimate the positive effects on total output and employment from increased Chinese import competition. They lack some important aggregate demand channels.

NAFTA and Industrial Adjustment: A Specific‐Factors Model of Production

The North American Free Trade Agreement (NAFTA) will continue to attract political debate as U.S. manufacturing industries adjust in the face of increased import competition and export opportunities. This study applies the specific factors model of production to manufacturing industries in Alabama to examine the pending adjustment. As industrial prices change, there will be small output adjustments in the short run and downward pressure on the wages of production workers. Projected changes in industrial investment will lead to substantial long‐run output adjustments.

International Trade and Worker Displacement: Evaluation of the Trade Adjustment Assistance Program

The Trade Adjustment Assistance (TAA) program offers unemployment compensation and re-employment adjustment services to workers who lose their jobs due to increased import competition. In 1981 and again in 1988, the program rules were changed to shift the emphasis from compensation to training. This paper examines the pre-layoff characteristics and post-layoff labor market experience of two nationally representative samples of TAA program participants, one of which participated in the program just before the 1988 amendments and the other just after. The authors find that the TAA program was well targeted during the time period studied: it served workers who were permanently displaced from their jobs and who experienced significant earnings losses due to their layoff. They find no evidence, however, tha training had a substantial positive impact on earnings of TAA trainees, at least in the first three years after their initial unemployment insurance claim.

Exporters, Jobs, and Wages in U.S. Manufacturing: 1976-1987

PERHAPS AT NO POINT in recent years has the debate over the direction of trade policy so demanded public attention. Whether it has been Al Gore and Ross Perot clashing on national television about the merits and pitfalls of the North American Free Trade Agreement (NAFTA), or individual members of Congress attempting to provide additional protection for domestic industries in the General Agreement on Tariffs and Trade (GATT), the debate over the pace and scope of changes in trade regulations and tariffs has been omnipresent. Both proponents and opponents of NAFTA and GATT have argued that the implementation of these treaties will have large and important effects on the domestic economy. Close to the surface in this debate is the issue of U.S. manufacturing competitiveness. The experience of increasing import competition, particularly from export-led economies such as Japan, Korea, Singapore, and Taiwan, concurrent with stagnant living standards during the 1970s and 1980s and decreasing employment in manufacturing, has left some people wondering aloud about the competitiveness of U.S. manufacturing. The concerns include the long-term viability of important

Exporting Jobs?: The Impact of Import Competition on Employment and Wages in U. S. Manufacturing

This paper investigates the effect of increased import competition on U. S. manufacturing employment and wages, using data for a panel of manufacturing industries over the 1977–1987 period. The empirical analysis uses previously unavailable industry import price data and an instrumental variables estimation strategy. The estimates suggest that changes in import prices have a significant effect on both employment and wages. The dramatic appreciation of the dollar between 1980 and 1985 is estimated to have reduced wages by 2 percent, and employment by 4.5–7.5 percent on average in this sample of trade-impacted industries.

Multinational Structures and Strategies of U.S. Food Firms

The focus of this report should be clear from the title; it is to analyze strategic mechanisms used by U.S. food manufacturers in an evolving world of global rivalry among firms from many nations. Several sources of evidence point to a growing geographic scope of markets, along with growing interdependence in national food industries. First, transportation costs among countries continue to decline because of ongoing productivity growth in air and water transportation and communications (McFarland). Second, many U.S. industries faced dramatic increases in import competition in the last twenty years (Eichengreen), while foreign investment links into and out of the U.S. continue to expand (Lipsey). Finally, trade in processed foods among developed economies continues to expand (OECD). Growing interdependence presents new profit opportunities for food firms, especially those who can effectively transfer existing competitive advantages to new markets. Growing trade and increased investment links may also lead to increased competition in domestic product and capital markets and an erosion of existing competitive advantages held by domestic firms and employees. Because increasing interdependence creates losers as well as winners, and because government policies may affect the size of any net gains as well as the distribution of gains, analysts and policy makers require detailed information about the sources and effects of growing trade and investment links. With increasing interdependence among national food sectors, firms will find themselves competing in many countries. We concentrate on strategies by which firms effect sales in a foreign market: licensing of a foreign manufacturer, exports from the United States, direct investment in the foreign country, or investment in a third country with export sales to the foreign market. In many ways, U.S. food firms have made a distinctive set of choices among modes of foreign entry, especially when compared to other U.S. corporations. A company's choice among modes of foreign entry is not arbitrary; rather, a set of product, market, firm, and government characteristics typically drive those choices. We limit our focus to sales strategies and do not explicitly consider methods of initiating direct investment, such as the choice between acquisition of an existing firm and the construction of new facilities. Acquisitions account for almost all initial direct investment in the U.S. food industry (Pagoulatos), while Connor asserts that acquisitions account for about half of direct investment by U.S. food parents. We highlight the particular structures and strategies of U.S. food manufacturers through the use of secondary sources and two principal databases. One is the Benchmark Survey of U.S. direct investment abroad, as reported by the U.S. Bureau of Economic Analysis (BEA) of the Department of Commerce for 1966, 1977, and 1982 (1987 is forthcoming). That source provides great detail for comparisons across industries and countries and over the recent past, but provides little disaggregated detail for firms or industries within the food

INDUSTRY PROTECTION PLANS: AUSTRALIAN FOOTWEAR MANUFACTURERS' REACTIONS

Australian footwear manufacturers were surveyed in late 1986 in order to identify actions undertaken since 1981 in response to the anticipated or actual increase in import competition as a result of the first seven year protection plan. A wide range of actions were undertaken, with capital investment in new production technology the most frequent and ‘most important’ action. This research indicates that the plan created organisational change which in turn promoted more efficient and effective business practices.

Chemical Earnings Braked Sharply In Third Quarter

A slowing economy and recalcitrant industrial product pricing reined in the chemical industry's earnings surge in the third quarter of 1984. Composite earnings of the 30 largest U.S. chemical producers increased 16%—not an insubstantial gain—but far less than the great leaps of the previous four consecutive business quarters. Another sign that the expansion has lost some steam was a great diversity of performance. Most companies' earnings rose, but at seven of the 30 firms, profits actually declined compared to the yearearlier quarter. In the April-to-june 1984 period, by contrast, every company recorded an increase in net income—in most cases, a large one. This mixed and diminished performance by the chemical industry reflects many developments: the falloff in housing starts, the strength of the dollar overseas, increased import competition, and the regular seasonal slowdown. Also, thirdquarter 1983 was the first major recovery quarter for chemical companies following the end of the last recession. So th...

Trade Adjustment Assistance as a Means of Achieving Improved Resource Allocation Through Freer Trade: An Analysis of Policies for Aiding the Import‐injured in the U.S., Canada and Australia

Abstract. Provisions made by the governments of the United States, Canada and Australia to compensate individuals injured on account of increased import competition are examined. The rationale for specifically favoring trade displaced workers, even though employees elsewhere, on account of technological and other changes, also experience disruption, is explained. There after, the salient features of the three countries’adjustment assistance schemes are Outlined and their relative effectiveness evaluated. By and large, none of the three countries has provided sufficient compensation or amelioration to attenuate resistance by either firms or workers to freer trade.

Profitability, Concentration and the Interindustry Variation in Wages

THIS paper explores empirically the hypothesis that product market imperfections affect the earnings of labor in U.S. manufacturing industries. To the extent that labor shares in the excess return due to product market power, any policies designed to reduce this power may restrain or reduce wages in the affected industry. Thus workers may oppose antitrust action aimed at their own industry. Workers may oppose increased import competition that restrains market power not only because of potential unemployment but also because this increased competition indirectly reduces future wages. In addition, measures of the social loss due to product market power are understated if some portion of costs are actually return to market power. The transfer from consumers to producers, including labor as a factor of production, is also understated. Past results attempting to isolate empirically the relation between product market power, usually represented by product market concentration, and labor earnings have been mixed. This paper argues and demonstrates that economic profitability is a superior measure to concentration in summarizing the relative extent of product market power across industries. After developing a model of the division of the total excess return available to an industry between labor and capital, the paper presents empirical results that support the hypothesis that excess return or economic profitability is superior to product market concentration in explaining the interindustry variation in wages. The results indicate that labor receives 7% to 14% of the total excess return. For empirical analysis other determinants of interindustry wage variation must be controlled. The first section of the paper briefly discusses certain relevant labor force characteristics. The second section examines the relationship between wages and product market power. The third section discusses the data and presents empirical results. If possible, variables are measured as four-year averages over 1967-1970, to avoid single-year disturbances in the data and to approach long-run equilibrium observations. The final section presents concluding comments.

Worker Adjustment to Import Competition: The United States Experience

Over the last decade there has been increased worldwide interest in “adjustment assistance” programmes that facilitate the rehabilitation of workers disadvantaged as a result of increased import competition. In particular, interest has been generated as a corollary of the multilateral movement towards freer international trade and the desire on the part of developed countries to offer preferential trading treatment to products from developing countries. Such international organisations as UNCTAD, GATT, ILO, and OECD have studied the adjustment problem and have recommended the adoption of national trade‐adjustment programmes[l].