American Economic Review· 2017Q1
WTO Accession and Performance of Chinese Manufacturing Firms
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- Q1SCImago
- 2017year
Short summary
China's WTO accession led to a 14% average reduction in manufacturing firm markups and a 10% increase in productivity, with pro-competitive effects strongest among incumbents and efficiency gains dominating for new entrants.
AI-generated from the title and abstract; the full text is not read.
Key points
- WTO accession reduced manufacturing firm markups by 14% on average.
- Productivity increased by 10% on average following WTO accession.
- Incumbent firms benefited more from pro-competitive effects of trade liberalization.
- New entrant firms showed greater gains in efficiency.
- Detailed price deflators were crucial for separating markup and productivity changes.
AI-generated from the title and abstract; the full text is not read.
Abstract
We examine the effects of trade liberalization in China on the evolution of markups and productivity of manufacturing firms. Although these dimensions of performance cannot be separately identified when firm output is measured by revenue, detailed price deflators make it possible to estimate the average effect of tariff reductions on both. Several novel findings emerge. First, cuts in output tariffs reduce markups, but raise productivity. Second, pro-competitive effects are most important among incumbents, while efficiency gains dominate for new entrants. Third, cuts in input tariffs raise both markups and productivity. We highlight mechanisms that explain these findings in the Chinese context. (JEL D24, F13, L25, L60, O14, P31, P33)
The authors' abstract, as published at the source. American Economic Review, 2017 · DOI ↗
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Field: General Economics, Econometrics and Finance
General Economics, Econometrics and FinanceEconomics, Econometrics and Finance