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Contractual versus non-contractual trade: The role of institutions in China

  • Feenstra, Robert C.
  • Hong, Chang
  • Ma, Hong
  • Spencer, Barbara J.

Recent research has demonstrated the importance of institutional quality at the country level for both the volume of trade and the ability to trade in differentiated goods that rely on contract enforcement. This paper takes advantage of cross-provincial variation in institutional quality in China, and export data that distinguishes between foreign and domestic exporters and processing versus ordinary trade, to show that institutional quality is a significant factor in determining Chinese provincial export patterns. Institutions matter more for processing trade and more for foreign firms, just as we would expect from a greater reliance on contracts in these cases.

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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 94 (2013)
Issue (Month): C ()
Pages: 281-294

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Handle: RePEc:eee:jeborg:v:94:y:2013:i:c:p:281-294
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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