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Processing Trade, Export Intensity, and Input Trade Liberalization: Evidence from Chinese Firms

In: Input Trade Liberalization in China

Author

Listed:
  • Wei Tian

    (University of International Business and Economics)

  • Miaojie Yu

    (Peking University)

Abstract

How do reductions in input trade costs affect firm’s sales decision between domestic and foreign markets? By using Chinese firm-level production data and transaction level trade data during 2000–2006 to construct firm-specific input trade costs, we find rich evidence that a reduction in input trade cost for large trading firms leads to an increase in export intensity (i.e., exports over total sales). The impact is more pronounced for ordinary firms than that for hybrid firms which engage in both processing and ordinary trade since ordinary import enjoys the free-duty treatment in China. The declining input trade costs not only increase the probability of firm’s being new exporters (i.e., extensive margin) but also lead to higher export intensity (i.e., intensive margin). Such results are robust to different empirical specification and econometric methods.

Suggested Citation

  • Wei Tian & Miaojie Yu, 2023. "Processing Trade, Export Intensity, and Input Trade Liberalization: Evidence from Chinese Firms," Contributions to Economics, in: Input Trade Liberalization in China, pages 65-86, Springer.
    • Handle: RePEc:spr:conchp:978-981-99-7599-0_4
    DOI: 10.1007/978-981-99-7599-0_4
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    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business

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