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

23 Pages Posted: 16 Jul 2013

See all articles by Miaojie Yu

Miaojie Yu

Peking University - China Center for Economic Research (CCER)

Guangliang Ye

Renmin University of China - Hanqing Institute

Baozhi Qu

Moscow School of Management - Skolkovo Institute for Emerging Market Studies

Date Written: July 2013

Abstract

This paper investigates the impact of trade liberalisation on firm productivity by using both Chinese manufacturing firm‐level data and highly disaggregated Chinese import data from 1998 to 2002. We construct a measure of firms’ total factor productivity by adopting an augmented Olley–Pakes semi‐parametric methodology to correct the simultaneity bias from reverse causality and selection bias from firms’ exits. Even when controlling for the endogeneity, trade liberalisation increases productivity for firms that produce complex goods (highly differentiated products). In contrast, we found that trade liberalisation has an opposite effect on the productivity of the producers of simple goods. Moreover, the effect of trade liberalisation 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.

Suggested Citation

Yu, Miaojie and Ye, Guangliang and Qu, Baozhi, Trade Liberalisation, Product Complexity and Productivity Improvement: Evidence from Chinese Firms (July 2013). The World Economy, Vol. 36, Issue 7, pp. 912-934, 2013. Available at SSRN: https://ssrn.com/abstract=2294302 or http://dx.doi.org/10.1111/twec.12046

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

Guangliang Ye

Renmin University of China - Hanqing Institute ( email )

59 Zhongguancun Street
Beijing, 100872
China

Baozhi Qu

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

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

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