Chinese Import Share and reallocation effect on employment and productivity within the Swedish manufacturing industry

Abstract: As China has become the top exporter in the world, new trade models move forward in explaining the interactions in world trade. Researchers advocate an increase in productivity and decreased survivability for low productive firms as China enters the market for domestic firms. The purpose of this paper is to research if a higher rate of import from China has a reallocation effect on productivity and employment, from smaller to larger firms for the Swedish manufacturing industry. The study uses panel data ranging from 2000-2015, with an Error-Correction Model approach. Results indicate that high import share from China has little evidence on employment reallocation, however, following previous evidence of redistribution within an industry where smaller firms’ productivity decrease and larger firms increase their productivity as Chinese Import Share increase in Sweden.