Trade Liberalization, Input Intermediaries and Firm Productivity: Evidence from China
46 Pages Posted: 20 Dec 2019
Date Written: 2019
We investigate theoretically and empirically the role of wholesalers in mediating the productivity effects of trade liberalization. Intermediaries provide indirect access to foreign produced inputs. The productivity effects of input tariff cuts on firms that do not directly import therefore depends on the extent that wholesalers are a feature of input supply within an industry. Using firm level data from China, we document that wholesalers play no such role for direct importers. However, other firms experience productivity gains from reducing input tariffs if trade intermediation of foreign inputs within their sector is high. They suffer efficiency losses otherwise.
Keywords: firm heterogeneity, trade liberalization, intermediate inputs, productivity, intermediaries, China
JEL Classification: F120, F130
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