Trade Liberalization and Embedded Institutional Reform: Evidence from Chinese Exporters

Khandelwal, Amit; Schott, Peter K.; Wei, Shang-Jin

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Trade Liberalization and Embedded Institutional Reform: Evidence from Chinese Exporters

CEPR Discussion Paper No. DP9246

57 Pages Posted: 1 Feb 2013

See all articles by Amit Khandelwal

Amit Khandelwal

Columbia University - Columbia Business School, Finance; National Bureau of Economic Research (NBER); Bureau for Research and Economic Analysis of Development (BREAD); Jameel Poverty Action Lab (JPAL)

Peter K. Schott

Yale University - School of Management; National Bureau of Economic Research (NBER); Yale University - Cowles Foundation

Shang-Jin Wei

Columbia University - Columbia Business School, Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

There are 2 versions of this paper

Date Written: December 2012

Abstract

If trade barriers are managed by inefficient institutions, trade liberalization can lead to greater-than-expected gains. We examine Chinese textile and clothing exports before and after the removal of externally imposed quotas. Both the surge in export volumes and the decline in prices after the quota removal are driven by net entry, implying that the pre-liberalization quota allocation is not based on firm productivity. Removing this misallocation accounts for a substantial share of the overall productivity gains associated with the quota removal.

Keywords: China, misallocation, Multifibre Agreement, productivity

JEL Classification: F1, O1

Suggested Citation: Suggested Citation

Khandelwal, Amit Kumar and Schott, Peter K. and Wei, Shang-Jin, Trade Liberalization and Embedded Institutional Reform: Evidence from Chinese Exporters (December 2012). CEPR Discussion Paper No. DP9246, Available at SSRN: https://ssrn.com/abstract=2210216