Negative shock faced by some imported inputs may affect firms’ sourcing network and probably deter firm-level performance in the end. In this paper, we use anti-dumping (AD) investigations as the source of negative shock and study the short-run response of domestic importers. Specifically, using detailed firm-product-country-level data from China, we examine the effect of China’s AD investigations on both targeted and non-targeted imports and propagation effect on performance of Chinese importers. Our empirical results reveal that on the extensive margin, once subject to AD shock, firms are more likely to explore new origins and also more likely to cut off exiting origins later for targeted imports while they become conservative about entry and exit decision of non-targeted imp...[ Read more ]

Negative shock faced by some imported inputs may affect firms’ sourcing network and probably deter firm-level performance in the end. In this paper, we use anti-dumping (AD) investigations as the source of negative shock and study the short-run response of domestic importers. Specifically, using detailed firm-product-country-level data from China, we examine the effect of China’s AD investigations on both targeted and non-targeted imports and propagation effect on performance of Chinese importers. Our empirical results reveal that on the extensive margin, once subject to AD shock, firms are more likely to explore new origins and also more likely to cut off exiting origins later for targeted imports while they become conservative about entry and exit decision of non-targeted imports. On the intensive margin, AD shock leads to trade diversion effect for targeted imports and trade depressing effect for non-targeted imports. Finally, disruption to some imported inputs caused by AD shock deters firm’s sales revenue. Our paper provides a more complete and comprehensive picture of AD consequences and has important ramifications for trade policy choice and design.