Export, Productivity Pattern, and Firm Size Distribution

We show in the Chinese Annual Survey of Industrial Firms that size distributions of non-exporters and exporters have different shapes, which can only be explained by assuming that their productivity distributions have different shapes. Empirical estimations verify this assumption. This paper also analyzes the relationship between firms' size and productivity distributions and shows that: 1) productivity and size distributions change accordingly, and 2) productivity is deterministic for size distribution.Heterogeneous firm, Pareto distribution, Production size, Productivity heterogeneity

Minimum wage and export: evidence from Chinese firm-level data

This paper proposes a two-country trade equilibrium model with heterogeneous firms to investigate the influences of minimum wages and productivity on firms' exports. It shows that the influence of minimum wages on firms' exporting probability and foreign sales is negative while that of firms' productivity on their exports is positive. Econometric analysis based on the Annual Survey of Chinese Industrial Firms as well as the data of minimum wages collected ourselves from 1998 to 2007 verifies these predictions. Holding the other variables constant, if minimum wages and their productivity increase by 100%$, then the elasticity of minimum wage on firms' exporting sales is -8.6$ and increases by 1.6%$, respectively.Minimum wage, heterogeneous firm, productivity, export

Firms' organizational modes with productivity heterogeneity, demand uncertainty and production capacity

This paper investigates how firms' demand uncertainty with capacity constraints and their productivity heterogeneity affect their making-or-buying organizational choices in a general equilibrium framework with incomplete contracts. It shows that a final-good producer may adopt integrating a part of the production of its intermediate input in-house and outsource it at arm's length domestically or abroad simultaneously. Moreover, Five organizational modes, exiting the market, outsourcing in the North, outsourcing in the South, integrating and outsourcing in the North simultaneously, and integrating in the North and outsourcing in the South simultaneously, in turn occur with increase of firm-level productivity, as well as its demand uncertainty. Influences of uncertainty and productivity on prevalence of various organizational modes are also explored

Export, Productivity Pattern, and Firm Size Distribution

We show in the Chinese Annual Survey of Industrial Firms that size distributions of non-exporters and exporters have different shapes, which can only be explained by assuming that their productivity distributions have different shapes. Empirical estimations verify this assumption. This paper also analyzes the relationship between firms' size and productivity distributions and shows that: 1) productivity and size distributions change accordingly, and 2) productivity is deterministic for size distribution

Firms' organizational modes with productivity heterogeneity, demand uncertainty and production capacity

This paper investigates how firms' demand uncertainty with capacity constraints and their productivity heterogeneity affect their making-or-buying organizational choices in a general equilibrium framework with incomplete contracts. It shows that a final-good producer may adopt integrating a part of the production of its intermediate input in-house and outsource it at arm's length domestically or abroad simultaneously. Moreover, Five organizational modes, exiting the market, outsourcing in the North, outsourcing in the South, integrating and outsourcing in the North simultaneously, and integrating in the North and outsourcing in the South simultaneously, in turn occur with increase of firm-level productivity, as well as its demand uncertainty. Influences of uncertainty and productivity on prevalence of various organizational modes are also explored

An Application of theMelitz Model to Chinese Firms

When the Melitz model is implemented in practice, the industrial productivity distribution is often assumed to be of Pareto form. In this case, a fundamental relationship $\kappa>\sigma-1$ must hold to guarantee the convergence of the industrial average productivity, where $\kappa$ is the concentration degree of the industrial productivity Pareto distribution and $\sigma$ is the substitution elasticity across varieties in the industry. This paper estimates the concentration degrees of the Pareto distribution in industrial productivity and industrial substitution elasticities using firm-level data of 40 Chinese manufacturing industries from 1998 and 2007. However, the paper shows that the above fundamental assumption $\kappa>\sigma-1$ does not hold for nearly all the industries for Chinese firm-level data. An explanation is proposed due to the distorted firm size and productivity for Chinese characteristics

Minimum wage and export: evidence from Chinese firm-level data

This paper proposes a two-country trade equilibrium model with heterogeneous firms to investigate the influences of minimum wages and productivity on firms' exports. It shows that the influence of minimum wages on firms' exporting probability and foreign sales is negative while that of firms' productivity on their exports is positive. Econometric analysis based on the Annual Survey of Chinese Industrial Firms as well as the data of minimum wages collected ourselves from 1998 to 2007 verifies these predictions. Holding the other variables constant, if minimum wages and their productivity increase by 100%$, then the elasticity of minimum wage on firms' exporting sales is -8.6$ and increases by 1.6%$, respectively

When Pareto meets Melitz: the inapplicability of the Melitz-Pareto model for Chinese firms

This paper realizes the Melitz-Pareto model using firm-level data from 40 Chinese manufacturing industries from 1998 and 2007. Under the hypothesis that the productivity of firms in each industry follows a Pareto distribution, we show that the domestic sales of non-exporters and the foreign sales of exporters in each industry also follow a Pareto distribution, respectively. We then estimate industrial productivity Pareto distributions, and cut-offs of domestic sales of non-exporters and foreign sales of exporters for each industry. Together this yields all the parameters of the Melitz-Pareto model. Our result shows that the Melitz-Pareto model may not fully apply to Chinese firms

Agglomeration and Trade with Heterogeneous Firms

The paper proposes a model to investigate the influences of agglomeration on heterogeneous firms' exporting behaviors. Competition and thus selection effect caused by agglomeration forces less productive firms to exit the market while agglomeration externalities increase firms' productivity and decreases industrial fixed entry, fixed and variable exporting costs, and effective labor wage. The former factors decrease while the latter increase firms' exporting possibilities and sales. The model shows that the composite effect of agglomeration on firms' exports takes on a Parabola-shape pattern. Moreover, higher-productivity firms benefit more export premium from agglomeration, which explains why larger and more productive firms in larger cities are more possible to export and exports more. Empirical results based on data from Chinese Industrial Enterprises between 1998 and 2007 verify the theoretical results. The paper also investigates the influences of different agglomeration patterns on firms exports, including home market effect, urban economies and competition effect and diversification effect. It shows that the former two patterns exert a positive while the latter two have a positive influence on firms' exporting behaviors

Minimum wage and export: evidence from Chinese firm-level data

This paper proposes a two-country trade equilibrium model with heterogeneous firms to investigate the influences of minimum wages and productivity on firms' exports. It shows that the influence of minimum wages on firms' exporting probability and foreign sales is negative while that of firms' productivity on their exports is positive. Econometric analysis based on the Annual Survey of Chinese Industrial Firms as well as the data of minimum wages collected ourselves from 1998 to 2007 verifies these predictions. Holding the other variables constant, if minimum wages and their productivity increase by 100%$, then the elasticity of minimum wage on firms' exporting sales is -8.6$ and increases by 1.6%$, respectively