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Factor Intensity, Product Switching, and Productivity: Evidence from Chinese Exporters

  • Yue Ma

    ()

    (Lingnan University)

  • Heiwai Tang

    ()

    (Tufts University, Centro Studi Luca d\'Agliano and MIT Sloan)

  • Yifan Zhang

    ()

    (Lingnan University)

This paper analyzes the causal relations between firms’ productivity, factor intensity and export participation. Using propensity score matching techniques and firm-level panel data for Chinese manufacturing firms over the 1998-2007 period, we find strong evidence of domestic firms self-selecting into export markets with higher productivity ex ante, and enhanced productivity ex post. No such pattern is observed among foreign-invested .rms. We also find that both domestic and foreign new exporters exploit China’s low labor costs and specialize in their core competence, that is, firms become less capital-intensive after exporting, relative to the matched non-exporting counterparts in the same industry. To rationalize these results that contrast with most findings in the existing literature, we develop a variant of the multi-product model of Bernard, Redding, and Schott (2010) to consider varying capital intensity across products. Using transaction-level export data, we find evidence that Chinese exporters add new products that are more labor-intensive than existing products and drop products that are less labor-intensive, supporting the model predictions. Firms with a bigger decline in capital intensity after exporting are found to have a larger increase in measured TFP.

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File URL: http://www.dagliano.unimi.it/media/WP2011_324.pdf
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Paper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 324.

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Length: 46
Date of creation: 27 Dec 2011
Date of revision: 27 Dec 2011
Handle: RePEc:csl:devewp:324
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