Essays in Firm Responses to Demand and Competition Shocks
The aim of this dissertation is to examine, model and estimate firm responses to
demand shocks by focusing on specific industries where demand shocks are well
identified. Combining reduced-form evidence and structural analysis, this dissertation
extends the economic literature by focusing on within-firm responses of firms
to two important demand shocks that are identifiable in empirical settings. First,
I focus on how firms respond to a decrease in effective demand due to competition
shocks coming from globalization. By considering China's accession to the World
Trade Organization in 2001 and its impact on the apparel industry, the aim of these
chapters is to answer how firms react to the increase in Chinese import competition,
what is the mechanism behind these responses, and how important they are in explaining
the survival of the Peruvian apparel industry. Second, I study how suppliers'
survival probability relates to the sudden disruption of their main customer-supplier
relationships with downstream manufacturers, conditional on suppliers' own idiosyncratic
characteristics such as physical productivity.
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