Unexceptional Exporter Performance in China? The Role of Processing Trade

44 Pages Posted: 23 Nov 2011 Last revised: 22 Feb 2013

See all articles by Mi Dai

Mi Dai

Beijing Normal University (BNU)

Madhura Maitra

Columbia University, Economics Department

Miaojie Yu

Peking University - China Center for Economic Research (CCER)

Date Written: November 23, 2011

Abstract

The firm level trade literature finds exporters are exceptional performers for a wide range of countries and measures. Paradoxically, the one documented exception is the world’s largest trader, China. We show that this puzzling finding is entirely driven by the presence of firms that engage in export processing – the activity of assembling tariff exempted imported inputs into final goods for resale in foreign markets. In China roughly a fifth of exporters, accounting for about one-third of total export value, are engaged in processing trade only. These firms are 4% to 30% less productive than non-exporters. Removing processing exporters restores the traditional finding that exporters have superior performance relative to non-exporters. Our results show that distinguishing between processing and ordinary exporters is crucial for understanding firm-level exporting behavior in China. It should also be investigated closely in other countries for which processing trade is important.

Keywords: processing trade, firm productivity, exports

JEL Classification: F1, O1

Suggested Citation

Dai, Mi and Maitra, Madhura and Yu, Miaojie, Unexceptional Exporter Performance in China? The Role of Processing Trade (November 23, 2011). Available at SSRN: https://ssrn.com/abstract=1963652 or http://dx.doi.org/10.2139/ssrn.1963652

Mi Dai

Beijing Normal University (BNU) ( email )

19 Xinjiekou Outer St
Haidian District
Beijing, Guangdong 100875
China

Madhura Maitra

Columbia University, Economics Department ( email )

420 W. 118th Street
New York, NY 10027
United States

HOME PAGE: http://www.columbia.edu/~mm3040/

Miaojie Yu (Contact Author)

Peking University - China Center for Economic Research (CCER) ( email )

Beijing, Beijing 100871
China
+86-10-6275-3109 (Phone)

HOME PAGE: http://mjyu.ccer.edu.cn

Register to save articles to
your library

Register

Paper statistics

Downloads
328
Abstract Views
1,513
rank
93,513
PlumX Metrics