Trade Liberalization, Product Complexity, and Productivity Improvement: Evidence from Chinese Firms

Posted: 5 Jan 2012

See all articles by Baozhi Qu

Baozhi Qu

Moscow School of Management - Skolkovo Institute for Emerging Market Studies

Guangliang Ye

Renmin University of China - Hanqing Institute

Miaojie Yu

Peking University - China Center for Economic Research (CCER)

Date Written: October 5, 2011

Abstract

This paper investigates the impact of trade liberalization on firm productivity by using both Chinese manufacturing firm-level data and highly disaggregated Chinese import data from 1998-2002. We construct a measure of firms’ total factor productivity (TFP) by adopting an augmented Olley-Pakes (1996) semi-parametric methodology to correct the simultaneity bias from reverse causality and selection bias from firms' exits. Even when controlling for the endogeneity, trade liberalization increases productivity for firms that produce complex goods (highly differentiated products). In contrast, we found that trade liberalization has an opposite effect on the productivity of the producers of simple goods. Moreover, the effect of trade liberalization on exporting firms is found to be smaller than that on non-exporting firms. Our main results are robust to the use of different econometric methods.

Keywords: trade liberalization, product complexity, productivity, Chinese firms

JEL Classification: F1, L1, O1, O2

Suggested Citation

Qu, Baozhi and Ye, Guangliang and Yu, Miaojie, Trade Liberalization, Product Complexity, and Productivity Improvement: Evidence from Chinese Firms (October 5, 2011). Available at SSRN: https://ssrn.com/abstract=1980012

Baozhi Qu (Contact Author)

Moscow School of Management - Skolkovo Institute for Emerging Market Studies ( email )

No. 8 Beichendong Road, Unit 1608
Chaoyang District
Beijing, Beijing 100101
China

Guangliang Ye

Renmin University of China - Hanqing Institute ( email )

59 Zhongguancun Street
Beijing, 100872
China

Miaojie Yu

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

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