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

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  • Yue Ma
  • Heiwai Tang
  • Yifan Zhang

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 firms. 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 Department of Economics, Tufts University in its series Discussion Papers Series, Department of Economics, Tufts University with number 0761.

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Date of creation: 2011
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Handle: RePEc:tuf:tuftec:0761

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Keywords: Exporters; Productivity; Factor Intensity; Multi product firms;

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Cited by:
  1. Vivian Yue & Jiandong Ju, 2013. "A Unified Model of Structural Adjustments and International Trade: Theory and Evidence from China," 2013 Meeting Papers, Society for Economic Dynamics 859, Society for Economic Dynamics.
  2. 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.
  3. 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).
  4. Wenya Cheng & John Morrow & Kitjawat Tacharoen, 2012. "Productivity as if space mattered: an application to factor markets across China," LSE Research Online Documents on Economics 48930, London School of Economics and Political Science, LSE Library.
  5. 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).
  6. 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).

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