American Economic Review· 2013Q1
Trade Liberalization and Embedded Institutional Reform: Evidence from Chinese Exporters
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- 2013year
Short summary
Eliminating export quotas for Chinese textile and clothing firms led to a substantial productivity gain, driven by new firms entering the market and reallocating resources away from less productive ones.
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Key points
- Export quotas for Chinese textile and clothing firms were inefficiently allocated based on factors other than firm productivity.
- Elimination of these quotas led to a net entry of firms, increasing export volume and decreasing export prices.
- Resource reallocation from less productive to more productive firms was a primary driver of productivity gains.
- The gains from removing misallocation were a substantial part of the overall productivity increase.
AI-generated from the title and abstract; the full text is not read.
Abstract
If trade barriers are managed by inefficient institutions, trade liberalization can lead to greater-than-expected gains. We examine Chinese textile and clothing exports before and after the elimination of externally imposed export quotas. Both the surge in export volume and the decline in export prices following quota removal are driven by net entry. This outcome is inconsistent with a model in which quotas are allocated based on firm productivity, implying misallocation of resources. Removing this misallocation accounts for a substantial share of the overall gain in productivity associated with quota removal. (JEL F13, F14, L67, O14, O19, P23, P33)
The authors' abstract, as published at the source. American Economic Review, 2013 · DOI ↗
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Field: General Economics, Econometrics and Finance
General Economics, Econometrics and FinanceEconomics, Econometrics and Finance