Managing Trade: Evidence from China and the US

70 Pages Posted: 26 Jun 2018

See all articles by Nicholas Bloom

Nicholas Bloom

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Kalina Manova

University College London - Department of Economics

Stephen Teng Sun

City University of Hong Kong (CityUHK) - Department of Accountancy

John Van Reenen

Massachusetts Institute of Technology (MIT)

Zhihong Yu

University of Nottingham - Leverhulme Centre for Research on Globalisation and Economic Policy (GEP)

Multiple version iconThere are 4 versions of this paper

Date Written: June 2018

Abstract

We present a heterogeneous-firm model in which management ability increases both production efficiency and product quality. Combining six micro-datasets on management practices, production and trade in Chinese and American firms, we find broad support for the model's predictions. First, better managed firms are more likely to export, sell more products to more destination countries, and earn higher export revenues and profits. Second, better managed exporters have higher prices, higher quality, and lower quality-adjusted prices. Finally, they also use a wider range of inputs, higher quality and more expensive inputs, and imported inputs from more advanced countries. The structural estimates indicate that management is important for improving production efficiency and product quality in both countries, but it matters more in China than in the US, especially for product quality. Panel analysis for the US and a randomized control trial in India suggest that management exerts causal effects on product quality, production efficiency, and exports. Poor management practices may thus hinder trade and growth, especially in developing countries.

Keywords: exports, Management, product quality, productivity

JEL Classification: F10, F14, F23, L20, O19, O32

Suggested Citation

Bloom, Nicholas and Manova, Kalina B. and Sun, Stephen Teng and Van Reenen, John and Yu, Zhihong, Managing Trade: Evidence from China and the US (June 2018). CEPR Discussion Paper No. DP13001. Available at SSRN: https://ssrn.com/abstract=3202273

Nicholas Bloom (Contact Author)

Stanford University - Department of Economics ( email )

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HOME PAGE: http://economics.stanford.edu/faculty/bloom

National Bureau of Economic Research (NBER) ( email )

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Kalina B. Manova

University College London - Department of Economics ( email )

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30 Gordon Street
London, WC1H 0AX
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Stephen Teng Sun

City University of Hong Kong (CityUHK) - Department of Accountancy ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
China

John Van Reenen

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
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Cambridge, MA 02139-4307
United States

Zhihong Yu

University of Nottingham - Leverhulme Centre for Research on Globalisation and Economic Policy (GEP) ( email )

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Nottingham, NG7 2RD
United Kingdom

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