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Managerial Incentives and the Organization of Chinese Processing Trade

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Listed:
  • Huiya Chen
  • Deborah L. Swenson

Abstract

Chinese processing trade has grown considerably as firms adopted a wide array of organizational forms to have their products assembled in China for export. To understand the organization of processing trade we modify Grossman and Helpman's (2004) model of managerial incentives to account for the economic costs associated with firms' input control decisions in China. We examine Chinese processing trade between 1992 and 2003 to test the model's predictions. As predicted by the model, we find that firm productivity is related to processing choices. In addition, the organization of processing trade is found to match tariff levels at the product level.

Suggested Citation

  • Huiya Chen & Deborah L. Swenson, 2010. "Managerial Incentives and the Organization of Chinese Processing Trade," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 17(3), pages 235-252.
  • Handle: RePEc:taf:raaexx:v:17:y:2010:i:3:p:235-252
    DOI: 10.1080/16081625.2010.9720864
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    References listed on IDEAS

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    1. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, December.
    2. Robert C. Feenstra & Barbara J. Spencer, 2005. "Contractual Versus Generic Outsourcing: The Role of Proximity," NBER Working Papers 11885, National Bureau of Economic Research, Inc.
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