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Trade Liberalization and Embedded Institutional Reform: Evidence from Chinese Exporters

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  • Amit K. Khandelwal
  • Peter K. Schott
  • Shang-Jin Wei

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.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 103 (2013)
Issue (Month): 6 (October)
Pages: 2169-95

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Handle: RePEc:aea:aecrev:v:103:y:2013:i:6:p:2169-95

Note: DOI: 10.1257/aer.103.6.2169
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  1. Pavcnik, Nina, 2002. "Trade Liberalization, Exit, and Productivity Improvement: Evidence from Chilean Plants," Review of Economic Studies, Wiley Blackwell, vol. 69(1), pages 245-76, January.
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Cited by:
  1. Vivian Yue & Jiandong Ju, 2013. "A Unified Model of Structural Adjustments and International Trade: Theory and Evidence from China," 2013 Meeting Papers 859, Society for Economic Dynamics.
  2. Nicholas Bloom & Paul M. Romer & Stephen J. Terry & John Van Reenen, 2014. "Trapped Factors and China's Impact on Global Growth," NBER Working Papers 19951, National Bureau of Economic Research, Inc.
  3. Fabrice Defever & Benedikt Heid & Mario Larch, 2011. "Spatial Exporters," CESifo Working Paper Series 3672, CESifo Group Munich.
  4. Italo Colantone & Rosario Crinò, 2011. "New Imported Inputs, New Domestic Products," Development Working Papers 312, Centro Studi Luca d\'Agliano, University of Milano.
  5. Ling Feng & Zhiyuan Li & Deborah L. Swenson, 2012. "The Connection between Imported Intermediate Inputs and Exports: Evidence from Chinese Firms," NBER Working Papers 18260, National Bureau of Economic Research, Inc.
  6. Dhritman Bhattacharya & Nezih Guner & Gustavo Ventura, 2013. "Distortions, Endogenous Managerial Skills and Productivity Differences," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 11-25, January.
  7. Martin, Julien & Mejean, Isabelle, 2014. "Low-wage country competition and the quality content of high-wage country exports," Journal of International Economics, Elsevier, vol. 93(1), pages 140-152.
  8. Alfonso A. Irarrazabal & Andreas Moxnes & Luca David Opromolla, 2011. "The Tip of the Iceberg: A Quantitative Framework for Estimating Trade Costs," Working Papers w201125, Banco de Portugal, Economics and Research Department.
  9. Patrick Conway & Marco Fugazza & M. Kerem Yuksel, 2013. "TURKISH ENTERPRISE-LEVEL RESPONSE TO FOREIGN TRADE LIBERALIZATION: The Removal of Agreements on Textiles and Clothing Quotas," UNCTAD Blue Series Papers 59, United Nations Conference on Trade and Development.

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