Factor Intensity, Product Switching, and Productivity: Evidence from Chinese Exporters

46 Pages Posted: 6 Mar 2012

See all articles by Yue Ma

Yue Ma

City University of Hong Kong (CityUHK) - Department of Economics & Finance

Heiwai Tang

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS); The University of Hong Kong - Faculty of Business and Economics; CESIfo; Kiel Institute for the World Economy

Yifan Zhang

Sun Yat-Sen University (SYSU) - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: December 1, 2011

Abstract

This paper analyzes the causal relations between firms’ productivity, factor intensity and export participation. Using propensity score matching techniques and firm-level panel data for Chinese manufacturing firms over the 1998-2007 period, we find strong evidence of domestic firms self-selecting into export markets with higher productivity ex ante, and enhanced productivity ex post. No such pattern is observed among foreign- invested firms. We also find that both domestic and foreign new exporters exploit China’s low labor costs and specialize in their core competence, that is, firms become less capital-intensive after exporting, relative to the matched non-exporting counterparts in the same industry. To rationalize these results that contrast with most findings in the existing literature, we develop a variant of the multi-product model of Bernard, Redding, and Schott (2010) to consider varying capital intensity across products. Using transaction-level export data, we find evidence that Chinese exporters add new products that are more labor-intensive than existing products and drop products that are less labor intensive, supporting the model predictions. Firms with a bigger decline in capital intensity after exporting are found to have a larger increase in measured TFP.

Keywords: Exporters, Productivity, Factor Intensity, Multi-product Firms

JEL Classification: F11, L16, O53

Suggested Citation

Ma, Yue and Tang, Heiwai and Zhang, Yifan, Factor Intensity, Product Switching, and Productivity: Evidence from Chinese Exporters (December 1, 2011). Centro Studi Luca d'Agliano Development Studies Working Paper No. 324, Available at SSRN: https://ssrn.com/abstract=2016373 or http://dx.doi.org/10.2139/ssrn.2016373

Yue Ma (Contact Author)

City University of Hong Kong (CityUHK) - Department of Economics & Finance ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

HOME PAGE: http://www.cb.cityu.edu.hk/staff/yuema24

Heiwai Tang

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS) ( email )

1740 Massachusetts Avenue, NW
Washington, DC 20036-1984
United States

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

CESIfo ( email )

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Munich, DE-81679
Germany

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, Schleswig-Hosltein D-24100
Germany

Yifan Zhang

Sun Yat-Sen University (SYSU) - Department of Economics ( email )

8 Castle Peak Road
Tuen Mun, NT
Hong Kong

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