TRADE: Firm Entry and Market Interdependence: Evidence from anti-dumping tariffs on Chinese exports; Dr Chang Sun (HKU Business School)

Abstract

We study firm entry and market interdependence in the international market. Exploring anti-dumping tariffs against Chinese exporters, we find that total export value and quantity drop not only in the focal markets where the tariffs apply but also in the third markets where tariffs do not change. Using firm-level data, we find that the decline in third markets is driven entirely by a reduction in firm entry. We build a heterogeneous firm model in which firms allocate efforts to enter multiple markets and allow such efforts to be complementary between markets. The model also incorporates variable markups using generalized Kimball preferences. Our model predicts the transmission of tariff shocks across markets through firms’ entry efforts and matches the responses of export quantities and prices to tariffs. We calibrate the model and quantify the impact of anti-dumping tariffs on sector-level outcomes.