Survival of the best fit: Exposure to low-wage countries and the (uneven) growth of U.S. manufacturing plants

• Published in: Journal of international economics 2006, Vol.68 (1), p.219-237
• Main Authors: Bernard, Andrew B., Jensen, J. Bradford, Schott, Peter K.
• Format: Article
• Language: English
• Subjects: Comparative advantage; Economic performance; Empirical tests; Factories; Financial performance; Imports; International competition; International economics; International trade; Low-wage country import competition; Manufacturing; Manufacturing plant; U.S.A
• ISSN: 0022-1996; 1873-0353
• DOI: 10.1016/j.jinteco.2005.06.002

This paper examines the role of international trade in the reallocation of U.S. manufacturing within and across industries from 1977 to 1997. Motivated by the factor proportions framework, we introduce a new measure of industry exposure to international trade that focuses on where imports originate rather than on their overall level. We find that plant survival and growth are negatively associated with industry exposure to low-wage country imports. Within industries, we show that manufacturing activity is disproportionately reallocated towards capital-intensive plants. Finally, we provide the first evidence that firms adjust their product mix in response to trade pressures. Plants are more likely to switch industries when exposure to low-wage countries is high.