Plant level adjustments to the China trade shock at the intensive and extensive margins

This paper presents first evidence for the opposing effects of imports and exports at the extensive and intensive employment margins. While soaring imports from China are associated with a higher probability of plant closure, exports have the opposite effect. Imports work through the extensive margin of plant closure only, whereas exports have an effect on employment through both margins. Plant closures occur at a lower probability in labor market segments with heightened export opportunities and these plants tend to expand employment. Moreover, we analyze potential interaction effects. Our analysis shows that i) lower domestic competition reduces the impact of both imports and exports on the probability of plant closure, ii) plants with higher productivity are less likely to react to the import shock and iii) a higher routine-task intensity favors the selection of plants due to import competition.

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