The Pro-Competitive Effect of Imports from China: an Analysis on Firm-level Price Data

Type de publication:

Web Article


working paper, Bank of Italy, Economic Research Department (2009)


Chine, compétitivité, entreprise, Europe de l'Ouest, importation, prix


The entry of China into world markets has been one of the strongest recent shocks to world trade and advanced countriesí industrial sectors. This is particularly true for Italy where labor intensive, low-technology productions represent a large share of output. Using Italian manufacturing firm-level data on output prices over the period 1990-2006, we test whether increased import competition from China has affected firms pricing strategies causing a reduction in the dynamics of prices and markups. After controlling for other price determinants (demand and cost, domestic competition and import penetration), we found that this is indeed the case. Instrumenting Chinaís share over world exports to Italy with Chinaís total world export market share proves the causal nature of the relationship we Find. Inspired by and in line with recent advances in international trade literature, we also show that the price effects of Chinese competitive pressures are stronger in less technologically advanced sectors and, within these sectors, for smaller Firms.

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