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Trade liberalization and Embedded Institutional Reform: Evidence from Chinese Exporters

  • Khandelwal, Amit
  • Schott, Peter K.
  • Wei, Shang-Jin

If trade barriers are managed by inefficient institutions, trade liberalization can lead to greater-than-expected gains. We examine Chinese textile and clothing exports before and after the removal of externally imposed quotas. Both the surge in export volumes and the decline in prices after the quota removal are driven by net entry, implying that the pre-liberalization quota allocation is not based on firm productivity. Removing this misallocation accounts for a substantial share of the overall productivity gains associated with the quota removal.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9246.

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Date of creation: Dec 2012
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Handle: RePEc:cpr:ceprdp:9246
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