Firm Performance and Trade with Low-Income Countries: Evidence from China

Do firms in developing countries shift trade towards developed economies as a result of high economic growth? The matched customs-manufacturing firm data used in this study confront this hypothesized link with empirical evidence. Our analysis reveals a rising low-income country trade share around and after China's accession to the World Trade Organization. Based on this stylized fact, we analyze the link between firm characteristics and trade with low-income countries. We find evidence for sequential sorting into different export-modes according to firm productivity: i) only the most productive firms export to low-income countries, ii) exporting to low-income countries is mostly coupled to exporting to high-income countries, and iii) firms that switch to export to markets with higher potential are younger than firms that switch to export to both high- and low-income markets. Moreover, we find that firms tend to start exporting through specialization on high-income markets before diversifying to both type of markets

Firm Performance and Trade with Low-Income Countries: Evidence from China

Krugman's (1979, 1980) monoplistic competition model of trade showed that countries with more similar per-capita GDP trade more with each other. Does this mean that developing countries shift trade towards developed countries as a result of high economic growth? The results reported in this paper challenge the link between per-capita GDP and trade predicted by the force of gravity. The matched customs-manufacturing firm data used in this study reveal a rising low-income country trade share around and after China's accession to the World Trade Organization. Based on this stylized fact we analyze the link between firm performance and different export strategies. We find strong evidence for sequential sorting into different export-modes. i) only the most productive firms export to low-income countries, ii) export to low-income countries is coupled to export to high-income countries, iii) younger firms solely export to export markets with higher potential, and iv) low-income markets are served additionally by older firms. Moreover, we find that entry into simultaneous exports to low- and high-income destinations is associated with a higher productivity compared to the average productivity measured by incumbents' firm performance

Firm performance and trade with low-income countries: Evidence from China

Do firms in developing countries shift trade towards developed economies as a result of high economic growth? The matched customs-manufacturing firm data used in this study confront this hypothesized link with empirical evidence. Our analysis reveals a rising low-income country trade share around and after China's accession to the World Trade Organization. Based on this stylized fact, we analyze the link between firm characteristics and trade with low-income countries. We find evidence for sequential sorting into different export-modes according to firm-productivity: i) only the most productive firms export to low-income countries, ii) exporting to low-income countries is mostly coupled to exporting to high-income countries, and iii) firms that switch to export to markets with higher potential are younger than firms that switch to export to both high- and low-income markets. Moreover, we find that firms tend to start exporting through specialization on high-income markets before diversifying to both type of markets.Erhöht Wachstum in Entwicklungsländern Handel mit entwickelten Ökonomien? Diese Arbeit untersucht das Exportverhalten chinesischer Firmen hinsichtlich des Handels mit Industrie- und Entwicklungsländern. Als Datenbasis verwenden wir gematchte Firmendaten mit detaillierten Informationen über Exportzielländer. Unsere Daten umfassen Chinas Beitritt in die WTO. Über den gesamten Zeitraum unserer Analyse finden wir einen leichten Anstieg der relativen Bedeutung anderer Entwicklungsländer für chinesische Exporteure. Aufbauend auf diesen stilisierten Fakten zeigt unsere Analyse, dass nur die produktivsten Firmen in Entwicklungsländer exportieren. Zum Zeitpunkt des Eintritts in den Export spezialisieren sich Firmen eher auf den Handel mit entwickelten Ökonomien. Länder mit niedrigerem Marktpotential werden tendenziell eher zusätzlich zu entwickelten Ökonomien bedient

WTO Accession and Performance of Chinese Manufacturing Firms

王璐航系厦门大学经济学科2012年新引进的助理教授，博士毕业于加拿大多伦多大学经济系，主要研究兴趣为中国经济、国际贸易与应用微观经济学。其论文曾在比较经济学国际重要期刊Journal of Comparative Economics上发表。本次王璐航发表在《美国经济评论》的论文利用中国加入WTO带来的关税变化研究中国最终产品以及中间投入品的市场开放对于制造业绩效的影响。研究发现最终产品关税的降低一方面压缩了大企业的价格加成，另一方面推动了行业生产效率的提高。与其他国家的经验不同，中国行业效率提升的主要原因是竞争机制的强化进而筛选出了更好的新企业进入。伴随着中间品关税的降低，中国的中间品进口增长有限，但是中间品价格大幅下降。得益于由此带来的成本降低，企业提高了加成率。中间品市场的变化也对新进入企业的生产效率有正的贡献。该文也是厦大经济学科“海归”教师在国际顶级期刊发表研究中国经济问题的众多学术论文的一个典型代表。【Abstract】China’s policy-makers argued that WTO accession and the accompanying trade liberalization would have a beneficial impact on the domestic economy. China’s import tariffs differed tremendously across industry in the earlier years, but converged to an almost uniform low level after WTO entry. We exploit sectoral variation in the extent of tariff reduction to identify the impact of increased import competition on firm performance and its contribution to the significant productivity growth over the 1995–2007 period. We find evidence of strong downward pressure on prices and mark-ups, but limited evidence that imports took away market share from domestic firms. Furthermore, much of the effects on sectoral productivity come from changes at the extensive margin. Sectors that liberalized most tend to attract especially productive entrants, private firms in particular, which can be rationalized by an increase in the minimum productivity threshold needed to survive in these sectors.seminar participants at Columbia University, the Universities of Zurich, Nottingham, and Frankfurt, and several conferences for comments. Funding by SSHRC, ERC and CFI/OIT is gratefully acknowledged

Particle-hole asymmetric ferromagnetism and spin textures in the triangular Hubbard-Hofstadter model

In a lattice model subject to a perpendicular magnetic field, when the lattice constant is comparable to the magnetic length, one enters the "Hofstadter regime," where continuum Landau levels become fractal magnetic Bloch bands. Strong mixing between bands alters the nature of the resulting quantum phases compared to the continuum limit; lattice potential, magnetic field, and Coulomb interaction must be treated on equal footing. Using determinant quantum Monte Carlo (DQMC) and density matrix renormalization group (DMRG) techniques, we study this regime numerically in the context of the Hubbard-Hofstadter model on a triangular lattice. In the field-filling phase diagram, we find a broad wedge-shaped region of ferromagnetic ground states for filling factor $\nu \lesssim 1$, bounded by incompressible states at filling factor $\nu = 1$. For magnetic field strengths $\Phi/\Phi_0 \lesssim 0.4$, we observe signatures of SU(2) quantum Hall ferromagnetism in the lowest magnetic Bloch band; however, we find no numerical evidence for conventional quantum Hall skyrmions. At large fields $\Phi/\Phi_0 \gtrsim 0.4$, above the ferromagnetic wedge, we observe a low-spin metallic region with spin correlations peaked at small momenta. We argue that the phenomenology of this region likely results from exchange interaction mixing fractal Hofstadter subbands. The phase diagram derived beyond the continuum limit points to a rich landscape to explore interaction effects in magnetic Bloch bands.Comment: 15 pages, 15 figure

Three Essays on the Chinese Economy

This dissertation comprises three essays. In the first two chapters, I examine the performance of Chinese firms in the context of trade liberalization: one chapter looks at the quality of China's exports and the other investigates the productivity impact of China's tariff reduction. In the third chapter, I study the change induced by a tax reform in the institutional incentive structure faced by Chinese village leaders.Ph

Spatial disparity of skill premium in China: The role of financial intermediation development

In China, the relative wages of high-skilled and low-skilled workers display huge variation across different regions. We examine whether financial intermediation development can explain such variation. Conceptually, better-developed financial intermediation helps financially-constrained firms raise new capital, which is usually skilledbiased, resulting in an increased demand for skilled labor and skill premium. Using a cross-section of workers from the 1% Population Survey of 2005, we find consistent evidence; besides, the relationship is stronger among workers in industries with higher capital-skill complementarity and in non-state-owned enterprises. Overall, our results suggest that the financial market plays a role in explaining skill premium in China

Quality Innovation, Cost Innovation, Export, and Firm Productivity Evolution: Evidence from the Chinese Electronics Industry

This paper classifies innovation as quality-improving or cost-reducing and estimates a dynamic model incorporating firm export, quality innovation, and cost innovation decisions. Estimation results show that export, quality innovation, and cost innovation increase next-period firm productivity by 1.39%, 1.23%, and 1.27%, respectively. Additionally, quality innovation raises next-period export demand by 47%. Counterfactual analyses suggest that (1) foreign market growth has a larger impact on firm export and innovation decisions than domestic market growth, but neither market significantly affects firm productivity; (2) subsidizing continuing quality innovators generates the highest financial return, and subsidizing continuing cost innovators brings the most productivity gain

WTO accession and performance of Chinese manufacturing firms

We examine the effects of trade liberalization in China on the evolution of markups and productivity of manufacturing firms. Although these dimensions of performance cannot be separately identified when firm output is measured by revenue, detailed price deflators make it possible to estimate the average effect of tariff reductions on both. Several novel findings emerge. First, cuts in output tariffs reduce markups, but raise productivity. Second, pro-competitive effects are most important among incumbents, while efficiency gains dominate for new entrants. Third, cuts in input tariffs raise both markups and productivity. We highlight mechanisms that explain these findings in the Chinese context.status: publishe

Trade Liberalization and the Performance of China's Manufacturing Sector

In 2010, China displaced the US as the world’s largest manufacturing country. Experts typically cite expanded access to international markets and high rates of investment as the chief reasons for the rapid growth in this sector. Often neglected in these accounts, however, is the role of a rapidly expanding domestic market, as well as impressive productivity growth over much of the 1990s and 2000s before the onset of the Great Recession (Brandt, Van Biesebroeck, and Zhang, 2012). In our recent article in the American Economic Review (Brandt et. al., 2017a), we utilize firm-level data covering most of China’s manufacturing sector to examine the effect of trade liberalization on firm-level markups and productivity over a period that spans China’s entry into WTO.status: publishe