WTO Accession and Performance of Chinese Manufacturing Firms
- (pp. 2784-2820)
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.Citation
Brandt, Loren, Johannes Van Biesebroeck, Luhang Wang, and Yifan Zhang. 2017. "WTO Accession and Performance of Chinese Manufacturing Firms." American Economic Review, 107 (9): 2784-2820. DOI: 10.1257/aer.20121266Additional Materials
JEL Classification
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- F13 Trade Policy; International Trade Organizations
- L25 Firm Performance: Size, Diversification, and Scope
- L60 Industry Studies: Manufacturing: General
- O14 Industrialization; Manufacturing and Service Industries; Choice of Technology
- P31 Socialist Enterprises and Their Transitions
- P33 Socialist Institutions and Their Transitions: International Trade, Finance, Investment, Relations, and Aid