Multiproduct Firms, Export Product Scope, and Trade Liberalization: The Role of Managerial Efficiency
HKIMR Working Paper No.02/2014
53 Pages Posted: 28 Jan 2014
Date Written: January 27, 2014
This paper provides a theoretical and empirical analysis of the effects of one-sided tariff cuts on firms' export product scope. The theoretical model explicitly incorporates cost of management in addition to the commonly used production cost. Firms are heterogeneous in terms of managerial efficiency but homogenous in terms of production productivity. The analysis predicts that the home country's tariff cut reduces all home firms' export product scope, whereas in response to the foreign country's tariff cut, a home firm's export product scope expands (shrinks) if the firm's management cost is low (high). These predictions are supported by our empirical analysis based on data on Chinese firms from 2000 to 2006.
Keywords: Multiproduct Firm, Management Cost, Managerial Efficiency, Export Product Scope, Trade Liberalization, China
JEL Classification: F12, F13, F15
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