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Trade Liberalization, Input Intermediaries and Firm Productivity: Evidence from China

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  • Fabrice Defever
  • Michele Imbruno
  • Richard Kneller

Abstract

We investigate theoretically and empirically the role of wholesalers in mediating the productivity effects of trade liberalization. Intermediaries provide indirect access to foreign produced inputs. The productivity effects of input tariff cuts on firms that do not directly import therefore depends on the extent that wholesalers are a feature of input supply within an industry. Using firm level data from China, we document that wholesalers play no such role for direct importers. However, other firms experience productivity gains from reducing input tariffs if trade intermediation of foreign inputs within their sector is high. They suffer efficiency losses otherwise.

Suggested Citation

  • Fabrice Defever & Michele Imbruno & Richard Kneller, 2019. "Trade Liberalization, Input Intermediaries and Firm Productivity: Evidence from China," CEP Discussion Papers dp1666, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp1666
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    More about this item

    Keywords

    firm heterogeneity; trade liberalization; intermediate inputs; productivity; intermediaries; China;

    JEL classification:

    • 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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