Multi-Dimensional Effects of International Trade: The Experience of Chinese Manufacturers

This paper evaluates the e ect of importing and exporting on firm-level productivity and intermediate input prices for Chinese manufacturing firms. Using a rich data set from Chinese manufacturers from 2000 to 2006, we find that international trade a ects firms through two channels: productivity growth and intermediate input prices. Both importing and exporting tend to increase firm productivity; in contrast, while export leads to higher input prices, importing firms enjoy lower input prices (presumably due to the expanded choice of inputs). We consistently estimate production functions in the presence of unobserved input price dispersion when firms may sell to both domestic and foreign markets. This allows us to jointly recover firm-level productivity and input prices for each firm. We use these values to investigate the sources of gains from international trade at the firm level. We also find that firms with higher productivity and lower input prices are more likely to export and import, and tend to export and import more.