Essays on the effects of international competition on firms and the labor market.

This dissertation examines how competition induced by international trade affects firms and labor markets in developed economies. While international trade benefits the consumer through thedecrease of prices and increases in the varieties that are on offer, trade-induced competition can have both positive and negative consequences that are not always well understood. In the first chapter, I critically assess whether Belgian multi-product exporters experience an adjustment in their product sales distribution as a result from competition in the foreign market. Any shift in the sales distribution that leads to increased sales of a firm's best performing products could entail an increase in the productivity of the firm, so that the level of competition a firm faces abroad could reverberate back to the domestic economy in which the firm produces. The other three chapters examine the effects of Chinese import competition on both the labor market and firms. Competition from imported goods originating from China has had strong effects on labor markets in developed countries and has been a rallying cry that mobilizes disenfranchised labor with far-reaching political implications. In the second chapter I show that a total of 1.9 million manufacturing jobs were lost in the Eurozone as a result from Chinese import competition. Moreover, I find it is important to account for both the industrial specialization of a region as well as the network of supply linkages, as shocks can spill-over from region to region depending on the level of interconnectedness of the industries in both regions. By accounting for these input-output linkages, I show that the current industrial structure of the Eurozone exacerbates rather than mitigates the asymmetric nature of shocks. In the third chapter, import competition from developing countries is not only considered as a negative demand shock to firms producing the same goods as those exported by developing countries to developed economies' markets. Rather, it is treated as a potential positive supply shock since firms can get access to new intermediates from abroad and more competition in the input market can benefit afirm by lowering production costs of its goods. My co-author and I show that this competition in the input market positively benefits firm-level employment. However, its effects on the firm vary both with the size of the firm as well as the share of blue-collar labor employed in the firm. In the final chapter, a more holistic approach is taken by considering both trade and technology trends in order to analyze what factors can be associated with labor market polarization in developed economies. My co-authors and I find that polarization mostly occurs as employment is shifted towards high- and low-paid jobs within industries and that this type of polarization is a result of the adoption of ICT in manufacturing industries. About a third of overall EU polarization was caused by structural changes across industries, where employment became more concentrated in industries with less middlepaid employees. We find that Chinese import competition aided in this process by decreasing employment in several manufacturing industries that form a stronghold of middle-paid employment. While there are large cross-country differences in the observed patterns of employment polarization, we find no proof that labor market institutions of a country are relevant in determining the level of polarization that was experienced.status: publishe