WTO Accession and Performance of Chinese Manufacturing Firms†

WTO Accession and Performance of Chinese Manufacturing Firms† AbstractWe 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. (JEL D24, F13, L25, L60, O14, P31, P33) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Review American Economic Association

WTO Accession and Performance of Chinese Manufacturing Firms†

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Publisher
American Economic Association
Copyright
Copyright © 2017 © American Economic Association
ISSN
0002-8282
D.O.I.
10.1257/aer.20121266
Publisher site
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Abstract

AbstractWe 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. (JEL D24, F13, L25, L60, O14, P31, P33)

Journal

American Economic ReviewAmerican Economic Association

Published: Sep 1, 2017

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