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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. We find that the surge in export value and decline in export prices following quota removal is driven by net entry, and show that this dominance is inconsistent with use of a productivity-based allocation of quota licenses by the Chinese government. Our counterfactual implies that elimination of misallocated quotas raised the overall productivity gain of quota removal by 28 percent.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17524.

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Date of creation: Oct 2011
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Publication status: published as Amit K. Khandelwal & Peter K. Schott & Shang-Jin Wei, 2013. "Trade Liberalization and Embedded Institutional Reform: Evidence from Chinese Exporters," American Economic Review, American Economic Association, vol. 103(6), pages 2169-95, October.
Handle: RePEc:nbr:nberwo:17524

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Citations

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Cited by:
  1. Dhritiman Bhattacharya & Nezih Guner & Gustavo Ventura, 2012. "Distortions, Endogenous Managerial Skills and Productivity Differences," Working Papers 673, Barcelona Graduate School of Economics.
  2. 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).
  3. Alfonso Irarrazabal & Andreas Moxnes & Luca David Opromolla, 2013. "The Tip of the Iceberg: A Quantitative Framework for Estimating Trade Costs," NBER Working Papers 19236, National Bureau of Economic Research, Inc.
  4. 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.
  5. Fabrice Defever & Benedikt Heid & Mario Larch, 2011. "Spatial Exporters," CEP Discussion Papers dp1100, Centre for Economic Performance, LSE.
  6. 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.
  7. 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.
  8. 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.
  9. Colantone, Italo & Crinò, Rosario, 2014. "New imported inputs, new domestic products," Journal of International Economics, Elsevier, vol. 92(1), pages 147-165.

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