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Heterogeneous Firms in Importing: Theory and Evidence from China

Author

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  • Yuting Chen

    (School of Economics, Singapore Management University, Singapore 178903, Singapore)

Abstract

In this study, I explore the effects of the financial status of firms on its decisions to import. The import decision is reflected in various aspects, such as whether to import or buy from home market; what types of goods to import, etc. A novelty of this analysis is that I distinguish between ordinary trade and processing trade, which involves importing inputs to be assembled and re-exported. Several novel patterns emerge. Firstly, a firm's financial status, especially its liquidity, significantly influences its decisions to import. Secondly, regional financial development also has a significantly affect importing decisions. However, a firm's creditworthiness and regional factors work independently (i.e., regional financial development does not alleviate a firm's credit constraints). The findings yield implications for developing economies which demand technological spillovers from advanced markets and those which maintain large trade surpluses with the developed economies.

Suggested Citation

  • Yuting Chen, 2015. "Heterogeneous Firms in Importing: Theory and Evidence from China," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 10(2), pages 301-334, June.
    • Handle: RePEc:fec:journl:v:10:y:2015:i:2:p:301-334
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    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-004-015-0013-2
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    More about this item

    Keywords

    heterogeneous firms; import; credit constraints;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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