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

  • Yue Ma

    (Lingnan University and Hong Kong Institute for Monetary Research)

  • Heiwai Tang

    (Tufts University and Hong Kong Institute for Monetary Research)

  • Yifan Zhang

    (Lingnan University)

Using Chinese manufacturing firm data over the period of 1998-2007, we find that firms become less capital-intensive after exporting, compared to similar non-exporting firms. To rationalize this finding that contrasts with existing evidence for most countries, we develop a variant of the multi-product model of Bernard, Redding, and Schott (2010) to consider products with varying capital intensity. In the model, firms in a labor-abundant country specialize in their core competency by allocating more resources to produce labor-intensive products after exporting. Consistent with the model predictions, we find evidence that the ex-ante more productive firms experience a smaller decline in capital intensity after exporting, but firms that experience a sharper decline in capital intensity after exporting have a larger increase in measured total factor productivity. Using transaction-level data, we confirm that Chinese exporters add new products that are less capital-intensive than their existing product portfolios and drop those that are more capital-intensive over time.

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Paper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 252012.

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Length: 44 pages
Date of creation: Oct 2012
Date of revision:
Handle: RePEc:hkm:wpaper:252012
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