PUB - Publikationen an der Universität Bielefeld

Using the dismantling of the Multi-fibre Arrangement quotas on Chinese textile and clothing products in conjunction with China's accession to WTO, within firms adjustments to intensified low-wage competition is analyzed. Employing Danish employer-employee matched data supple- mented with transaction-level data from between 1995 and 2007, the analysis shows a significant increase in skill and capital intensity associated with downsizing in response to heightened com- petition. Competition is found to negatively affect employment, value-added and intangible assets of the Danish firms, and firms are found to refocus their innovative efforts away from goods where China's competitive advantage becomes higher. The results show an important role of the distri- butional impact of low-wage competition within firms in restructuring the industry and support theories that indicate compositional changes in the scopes and operations of \Northern" firms in response to competition from \South".