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Trade liberalization and Embedded Institutional Reform: Evidence from Chinese Exporters

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

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 removal of externally imposed quotas. Both the surge in export volumes and the decline in prices after the quota removal are driven by net entry, implying that the pre-liberalization quota allocation is not based on firm productivity. Removing this misallocation accounts for a substantial share of the overall productivity gains associated with the quota removal.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9246.

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Date of creation: Dec 2012
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Handle: RePEc:cpr:ceprdp:9246

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Keywords: China; misallocation; Multifibre Agreement; productivity;

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References

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  1. Amit Khandelwal, 2010. "The Long and Short (of) Quality Ladders," Review of Economic Studies, Oxford University Press, vol. 77(4), pages 1450-1476.
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Citations

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Cited by:
  1. Ling Feng & Zhiyuan Li & Deborah L. Swenson, 2012. "The Connection between Imported Intermediate Inputs and Exports: Evidence from Chinese Firms," IAW Discussion Papers 86, Institut für Angewandte Wirtschaftsforschung (IAW).
  2. 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.
  3. Italo Colantone & Rosario Crinò, 2011. "New Imported Inputs, New Domestic Products," Development Working Papers 312, Centro Studi Luca d\'Agliano, University of Milano.
  4. Fabrice Defever & Benedikt Heid & Mario Larch, 2011. "Spatial Exporters," CEP Discussion Papers dp1100, Centre for Economic Performance, LSE.
  5. Nicholas Bloom & Paul Romer & Stephen Terry & John Van Reenen, 2014. "Trapped Factors and China's Impact on Global Growth," CEP Discussion Papers dp1261, Centre for Economic Performance, LSE.
  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. 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.
  8. 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.
  9. 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.

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