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Processing Trade, Firms Productivity, and Tariff Reductions : Evidence from Chinese Products

  • Miaojie Yu

    (China Center for Economic Research)

This paper explores how processing trade, jointly with tariff reduction, can improve a firm's productivity. Tariff reductions generate productivity gain via competition, whereas processing export does so via spillovers. Using mostly disaggregated Chinese product-level trade data and firm-level production data from 2000--2006, after constructing firm-level tariffs based on product information and controlling for possible endogeneity, I found that a 10% tariff decrease generates a 12% increase in a firm's productivity gain. In addition, processing firms enjoy significant productivity gains via spillovers, with heterogeneity across firms divided according to ownership. These findings are robust to various econometric methods, disaggregated specifications, and measures.

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Paper provided by East Asian Bureau of Economic Research in its series Trade Working Papers with number 22873.

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Date of creation: Jan 2010
Handle: RePEc:eab:tradew:22873
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