How You Export Matters: Export Mode, Learning and Productivity in China

Abstract

This paper shows that how firms export (directly or indirectly via intermediaries) matters. We develop and estimate a dynamic discrete choice model that allows learning-by-exporting on the cost and demand side as well as sunk/fixed costs to differ by export mode. We find that demand and productivity evolve more favorably under direct exporting, though the fixed/sunk costs of this option are higher. Our results suggest that had China not liberalized its direct trading rights when it joined the WTO, its exports and export participation would have been 30 and 37 percent lower respectively.