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Trade and Product Market Policies in Upstream Sectors and Productivity in Downstream Sectors: Firm-Level Evidence from China

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  • Maria Bas
  • Orsetta Causa

Abstract

This paper explores the productivity impact of trade, product market and financial market policies over the last decade in China – a fast growing country where, despite significant reform action, regulatory stance remains still far from OECD standards. The paper makes a critical distinction between downstream and upstream industries, focusing on the indirect effects of regulation in upstream industries on firm performance in downstream manufacturing industries. This framework allows investigating the link between these policies and productivity growth depending on how far incumbents are relative to the technological frontier. The analysis is novel in several respects. Drawing on new OECD policy indicators of sector-level product market regulation and firm level data, econometric estimates deliver new evidence on the potential gains from product and financial market reforms in China, two policy areas that had not been studied in previous empirical literature. Firm-level microeconomic data further allow shedding light on the differential effects of policies within industries, while also highlighting the potential channels through which productivity is affected by reform. The key conclusion that can be derived from the empirical analysis is that further product, trade and financial market reforms would bring substantial gains in China and could therefore speed up the convergence process. Taken at face value, the empirical estimates would imply that aligning product, trade and financial market regulation to the average level observed in OECD countries would bring aggregate manufacturing productivity gains of respectively 9%, 4% and 6.5% after five years. Trade and product market reforms are found to deliver stronger gains for firms that are closer to the industry-level technological frontier, while the reverse holds for financial market reforms. L'impact des réglementations commerciales et du marché des produits dans les secteurs en amont sur la productivité en Chine : une analyse sur données de firmes Cet article explore l’impact des réformes structurelles dans les domaines du commerce international, du marché des produits et des marchés financiers sur la productivité Chinoise au cours des dix dernières, la Chine pouvant être considéré comme un pays en forte croissance dans lequel, malgré la mise en ouvre de réformes importantes, la politique réglementaire reste bien loin des standards de l’OCDE. Cet articule fait une distinction cruciale entre les secteurs en amont et les secteurs en aval, et se concentre sur les effets indirects de la régulation en amont sur la productivité en aval. Ce cadre permet d’étudier le lien entre ces politiques et la croissance de la productivité en fonction de la distance qui sépare les firmes de la frontière technologique. L’analyse est nouvelle à plusieurs égards. S’appuyant sur de nouveaux indicateurs de l’OCDE sur la réglementation du marché des produits et sur une base de données au niveau de la firme, l’analyse délivre des résultats nouveaux sur les gains potentiels en Chine de réformes sur les marchés de produits et financiers, deux domaines inexplorés dans la littérature précédente. Les données au niveau de la firme permettent de mettre en lumière l’effet différentiel des politiques au sein de chaque secteur, et donc par là même les mécanismes potentiels via lesquels les réformes affectent la productivité. La conclusion principale est que davantage de réformes dans les domaines précités pourraient apporter des gains substantiels en Chine, ce qui pourrait donc accélérer le processus de convergence. Les résultats empiriques impliqueraient, pris tels à la lettre, qu’un alignement des politiques réglementaires dans les domaines du marché des produits, du commerce international et des marchés financiers sur le niveau moyen observé dans les pays de l’OCDE apporterait des gains agrégés de productivité de l’ordre de 9%, 4%, et 6.5% respectivement au bout de cinq ans. Les réformes commerciales et du marché des produits délivrent des gains plus importants pour les firmes prés de la frontière technologique tandis que le résultat inverse est trouvé pour les réformes des marchés financiers.

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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 990.

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Date of creation: 20 Sep 2012
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Handle: RePEc:oec:ecoaaa:990-en

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Keywords: financial liberalisation; trade liberalisation; China; productivity; product market reform; firm level data; libéralisation commerciale; productivité; libéralisation financière; Chine; données de firmes; réformes du marché des produits;

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