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Processing Trade, Productivity and Prices: Evidence from a Chinese Production Survey

Author

Listed:
  • Yao Amber Li

    (Hong Kong University of Science and Technology)

  • Valerie Smeets

    (Department of Economics and Business Economics, Aarhus University, Denmark)

  • Frederic Warzynski

    (Department of Economics and Business Economics, Aarhus University, Denmark)

Abstract

In this paper, we use a detailed production survey in the Chinese manufacturing industry to estimate both revenue and physical productivity and relate our measurements to firms' trade activity. We find that Chinese exporters for largely export oriented products like leather shoes or shirts appear to be less efficient than firms only involved on the domestic market based on the standard revenue productivity measure. However, we show strong positive export premium when we instead consider physical productivity. The simple and intuitive explanation of our results is that exporters charge on average lower prices. We focus more particularly on the role of processing trade and find that price differences are especially (and probably not surprisingly) large for firms involved in this type of contractual arrangements.

Suggested Citation

  • Yao Amber Li & Valerie Smeets & Frederic Warzynski, 2017. "Processing Trade, Productivity and Prices: Evidence from a Chinese Production Survey," Economics Working Papers 2017-12, Department of Economics and Business Economics, Aarhus University.
  • Handle: RePEc:aah:aarhec:2017-12
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    References listed on IDEAS

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    5. Klette, Tor Jakob & Griliches, Zvi, 1996. "The Inconsistency of Common Scale Estimators When Output Prices Are Unobserved and Endogenous," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(4), pages 343-361, July-Aug..
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    8. Alvaro Garcia-Marin & Nico Voigtländer, 2019. "Exporting and Plant-Level Efficiency Gains: It's in the Measure," Journal of Political Economy, University of Chicago Press, vol. 127(4), pages 1777-1825.
    9. Dai, Mi & Maitra, Madhura & Yu, Miaojie, 2016. "Unexceptional exporter performance in China? The role of processing trade," Journal of Development Economics, Elsevier, vol. 121(C), pages 177-189.
    10. Defever, Fabrice & Riaño, Alejandro, 2017. "Subsidies with export share requirements in China," Journal of Development Economics, Elsevier, vol. 126(C), pages 33-51.
    11. Smeets, Valerie & Warzynski, Frederic, 2013. "Estimating productivity with multi-product firms, pricing heterogeneity and the role of international trade," Journal of International Economics, Elsevier, vol. 90(2), pages 237-244.
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    Cited by:

    1. Zhiyuan Chen & Aksel Erbahar & Yuan Zi, 2019. "Made and Created in China: Super Processors and Two-way Heterogeneity," Tinbergen Institute Discussion Papers 19-080/VI, Tinbergen Institute.
    2. Ina C. Jäkel & Allan Sørensen, 2020. "Quality‐cum‐price sorting," The World Economy, Wiley Blackwell, vol. 43(5), pages 1346-1370, May.

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    More about this item

    Keywords

    Productivity; prices; processing trade; China;
    All these keywords.

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • D2 - Microeconomics - - Production and Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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