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Factor Intensity, Product Switching, and Productivity: Evidence from Chinese Exporters

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Author Info

  • Yue Ma

    ()
    (Lingnan University)

  • Heiwai Tang

    ()
    (Tufts University, Centro Studi Luca d\'Agliano and MIT Sloan)

  • Yifan Zhang

    ()
    (Lingnan University)

Abstract

This paper analyzes the causal relations between firms’ productivity, factor intensity and export participation. Using propensity score matching techniques and firm-level panel data for Chinese manufacturing firms over the 1998-2007 period, we find strong evidence of domestic firms self-selecting into export markets with higher productivity ex ante, and enhanced productivity ex post. No such pattern is observed among foreign-invested .rms. We also find that both domestic and foreign new exporters exploit China’s low labor costs and specialize in their core competence, that is, firms become less capital-intensive after exporting, relative to the matched non-exporting counterparts in the same industry. To rationalize these results that contrast with most findings in the existing literature, we develop a variant of the multi-product model of Bernard, Redding, and Schott (2010) to consider varying capital intensity across products. Using transaction-level export data, we find evidence that Chinese exporters add new products that are more labor-intensive than existing products and drop products that are less labor-intensive, supporting the model predictions. Firms with a bigger decline in capital intensity after exporting are found to have a larger increase in measured TFP.

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Bibliographic Info

Paper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 324.

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Length: 46
Date of creation: 27 Dec 2011
Date of revision: 27 Dec 2011
Handle: RePEc:csl:devewp:324

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Keywords: Exporters; Productivity; Factor Intensity; Multi-product Firms;

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Citations

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Cited by:
  1. Fabrice Defever & Alejandro Riaño, 2012. "China's pure exporter subsidies," LSE Research Online Documents on Economics 48929, London School of Economics and Political Science, LSE Library.
  2. Wenya Cheng & John Morrow & Kitjawat Tacharoen, 2013. "Productivity as if Space Mattered: An Application to Factor Markets Across China," CESifo Working Paper Series 4494, CESifo Group Munich.
  3. ITO Banri & XU Zhaoyuan & YASHIRO Naomitsu, 2013. "Does Agglomeration Promote the Internationalization of Chinese Firms?," Discussion papers 13081, Research Institute of Economy, Trade and Industry (RIETI).
  4. Fabrice Defever & Alejandro Riaño, 2013. "China's Pure Exporter Subsidies," FIW Working Paper series 121, FIW.
  5. 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).
  6. 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.
  7. WAKASUGI Ryuhei & Hongyong ZHANG, 2012. "Effects of Ownership on Exports and FDI: Evidence from Chinese firms," Discussion papers 12058, Research Institute of Economy, Trade and Industry (RIETI).

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