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

Hong Kong Institute for Monetary and Financial Research (HKIMR) Research Paper WP No. 25/2012

Journal of International Economics, Volume 92, Issue 2, March 2014, Pages 349-362

44 Pages Posted: 3 Nov 2012 Last revised: 26 Jul 2022

Multiple version iconThere are 2 versions of this paper

Date Written: October 31, 2012

Abstract

This working paper was written by Yue Ma (Lingnan University), Heiwai Tang (Tufts University) and Yifan Zhang (Lingnan University).

Using Chinese manufacturing firm data over the period of 1998-2007, we find that firms become less capital-intensive after exporting, compared to similar non-exporting firms. To rationalize this finding that contrasts with existing evidence for most countries, we develop a variant of the multi-product model of Bernard, Redding, and Schott (2010) to consider products with varying capital intensity. In the model, firms in a labor-abundant country specialize in their core competency by allocating more resources to produce labor-intensive products after exporting. Consistent with the model predictions, we find evidence that the ex-ante more productive firms experience a smaller decline in capital intensity after exporting, but firms that experience a sharper decline in capital intensity after exporting have a larger increase in measured total factor productivity. Using transaction-level data, we confirm that Chinese exporters add new products that are less capital-intensive than their existing product portfolios and drop those that are more capital-intensive over time.

Keywords: exporters, productivity, factor intensity, multi-product firms

JEL Classification: F11, L16, O53

Suggested Citation

Hong Kong Institute for Monetary and Financial Research, Factor Intensity, Product Switching, and Productivity: Evidence from Chinese Exporters (October 31, 2012). Hong Kong Institute for Monetary and Financial Research (HKIMR) Research Paper WP No. 25/2012 , Journal of International Economics, Volume 92, Issue 2, March 2014, Pages 349-362, Available at SSRN: https://ssrn.com/abstract=2169817 or http://dx.doi.org/10.2139/ssrn.2169817

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