Trade Liberalization, Input Intermediaries and Firm Productivity: Evidence from China

We investigate theoretically and empirically the role of wholesalers in mediating the productivity effects of trade liberalization. Intermediaries provide indirect access to foreign produced inputs. The productivity effects of input tariff cuts on firms that do not directly import therefore depends on the extent that wholesalers are a feature of input supply within an industry. Using firm level data from China, we document that wholesalers play no such role for direct importers. However, other firms experience productivity gains from reducing input tariffs if trade intermediation of foreign inputs within their sector is high. They suffer efficiency losses otherwise

Export adjustment to input trade liberalization. The role of import wholesaling services

This paper studies how input trade liberalization affects export performance, by stressing the important role played by import wholesaling services. Using data from China, we find that input tariff cuts imply a decline in aggregate export revenues in mostly direct-importing sectors, through the exit of varieties from the export market (extensive margin), and a decrease in the foreign sales of surviving varieties (intensive margin). These effects are due to within-variety efficiency losses, associated with efficiency gains from market share reallocations across varieties. Opposite results are found in sectors that generally rely on wholesalers when importing intermediate inputs

A micro-founded approach to exploring gains from trade integration. Evidence from 27 EU countries

This paper studies how trade integration of both final output and intermediate input markets affected aggregate efficiency and welfare in the European Union (EU) during the period 2004-2012. The results suggest that aggregate efficiency gains from trade mainly occur through input switching effects within firms and output reallocation effects across firms. Moreover, welfare gains from trade are relatively smaller than aggregate efficiency gains, due to a decrease in domestic final varieties

Importing under trade policy uncertainty: Evidence from China

This paper empirically explores the adjustment of imports to reductions in trade policy uncertainty (TPU), taking into account that firms may face large sunk costs when purchasing foreign goods. We investigate how product-level Chinese imports react to tariff binding arising from China's accession to the WTO, by distinguishing both country-related and firm-related margins. Our main results suggest that a decline in TPU allows access to a greater variety of foreign goods, that are also associated with higher quality. At the same time, tariff binding leads more Chinese producers and trade intermediaries to start importing, thus allowing a greater number of firms and consumers to enjoy potential gains from imports. Finally, we document heterogeneous TPU effects across firms with different ownership, as well as across products with different end use, revealing interesting insights into the context of global value chains

China and WTO liberalization: Imports, tariffs and non-tariff barriers

This paper explores the effectiveness of different trade policy instruments on product-level Chinese imports over the period of 2000-2006. More specifically, in addition to the declines in tariffs, we investigate the impact on imports of the gradual removal of non-tariff barriers (NTBs) as agreed within the WTO's accession protocol in 2001 (such as import quotas, licenses and tendering requirements). We document that while manufacturing imports mainly increase because of tariff cuts, agricultural imports grow due to the elimination of import licenses. However, we provide evidence that quota elimination is associated with a redistribution of imports along a larger range of countries, whereas tendering liberalization is connected to an import reallocation from OECD to non-OECD countries. Finally, we also find that NTB protection is complementary to tariff protection and discriminating against foreign-owned manufacturing firms

On Economic Complexity and the Fitness of Nations

Complex economic systems can often be described by a network, with nodes representing economic entities and edges their interdependencies, while network centrality is often a good indicator of importance. Recent publications have implemented a nonlinear iterative Fitness-Complexity (FC) algorithm to measure centrality in a bipartite trade network, which aims to represent the 'Fitness' of national economies as well as the 'Complexity' of the products being traded. In this paper, we discuss this methodological approach and conclude that further work is needed to identify stable and reliable measures of fitness and complexity. We provide theoretical and numerical evidence for the intrinsic instability in the nonlinear definition of the FC algorithm. We perform an in-depth evaluation of the algorithm's rankings in two real world networks at the country level: the global trade network, and the patent network in different technological domains. In both networks, we find evidence of the instabilities predicted theoretically, and show that 'complex' products or patents tend often to be those that countries rarely produce, rather than those that are intrinsically more difficult to produce