IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Expanding Export Variety: The Role of Institutional Reforms in Developing Countries

  • Sheng, Liugang

    ()

    (Chinese University of Hong Kong)

  • Yang, Dennis T.

    ()

    (University of Virginia)

This paper presents theory and evidence showing that institutional reforms in developing countries can effectively expand their product varieties in export. Our model demonstrates that relaxing foreign ownership controls and improving contract enforcement can induce multinational companies to produce new products in host developing countries, and that a combination of the two reforms has an amplifying effect on the introduction of product varieties. Consistent with these theoretical predictions, we find empirically that ownership liberalization and judicial quality played an important role in raising the extensive margin of processing exports in China for the period of 1997-2007.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://ftp.iza.org/dp7611.pdf
Download Restriction: no

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7611.

as
in new window

Length: 49 pages
Date of creation: Sep 2013
Date of revision:
Handle: RePEc:iza:izadps:dp7611
Contact details of provider: Postal:
IZA, P.O. Box 7240, D-53072 Bonn, Germany

Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org

Order Information: Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. David Weinstein & Christian Broda, 2004. "Globalization and the Gains from Variety," 2004 Meeting Papers 530, Society for Economic Dynamics.
  2. Zhi Wang & Shang-Jin Wei, 2010. "What Accounts for the Rising Sophistication of China's Exports?," NBER Chapters, in: China's Growing Role in World Trade, pages 63-104 National Bureau of Economic Research, Inc.
  3. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  4. Ricardo Hausmann & Jason Hwang & Dani Rodrik, 2005. "What You Export Matters," NBER Working Papers 11905, National Bureau of Economic Research, Inc.
  5. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
  6. Andrei A. Levchenko, 2007. "Institutional Quality and International Trade," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 791-819.
  7. Keith Head & Thierry Mayer, 2013. "Gravity Equations: Workhorse, Toolkit, and Cookbook," Working Papers hal-00973067, HAL.
  8. Feenstra, Robert C. & Hong, Chang & Ma, Hong & Spencer, Barbara J., 2013. "Contractual versus non-contractual trade: The role of institutions in China," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 281-294.
  9. Richard Baldwin & James Harrigan, 2007. "Zeros, Quality and Space: Trade Theory and Trade Evidence," NBER Working Papers 13214, National Bureau of Economic Research, Inc.
  10. Dani Rodrik, 2006. "What's So Special about China's Exports?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 14(5), pages 1-19.
  11. Diwan, Ishac & Rodrik, Dani, 1991. "Patents, appropriate technology, and North-South trade," Journal of International Economics, Elsevier, vol. 30(1-2), pages 27-47, February.
  12. Daron Acemoglu & Simon Johnson & Todd Mitton, 2009. "Determinants of Vertical Integration: Financial Development and Contracting Costs," Journal of Finance, American Finance Association, vol. 64(3), pages 1251-1290, 06.
  13. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
  14. Rubinstein, Yona & Helpman, Elhanan & Melitz, Marc, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," Scholarly Articles 3228230, Harvard University Department of Economics.
  15. Shang-Jin Wei, 1997. "How Taxing is Corruption on International Investors?," William Davidson Institute Working Papers Series 63, William Davidson Institute at the University of Michigan.
  16. Kalina Manova & Zhiwei Zhang, 2009. "Export Prices Across Firms and Destinations," NBER Working Papers 15342, National Bureau of Economic Research, Inc.
  17. Santos Silva, J.M.C & Tenreyro, Silvana, 2005. "The Log of Gravity," CEPR Discussion Papers 5311, C.E.P.R. Discussion Papers.
  18. Fernandes, Ana P. & Tang, Heiwai, 2012. "Determinants of vertical integration in export processing: Theory and evidence from China," Journal of Development Economics, Elsevier, vol. 99(2), pages 396-414.
  19. Gene M. Grossman & Elhanan Helpman, 1989. "Endogenous Product Cycles," NBER Working Papers 2913, National Bureau of Economic Research, Inc.
  20. John Romalis, 2004. "Factor Proportions and the Structure of Commodity Trade," American Economic Review, American Economic Association, vol. 94(1), pages 67-97, March.
  21. Bastos, Paulo & Silva, Joana, 2010. "The quality of a firm's exports: Where you export to matters," Journal of International Economics, Elsevier, vol. 82(2), pages 99-111, November.
  22. Antras, Pol & Helpman, Elhanan, 2004. "Global Sourcing," Scholarly Articles 3196327, Harvard University Department of Economics.
  23. Rudiger Dornbusch & Stanley Fischer & Paul A. Samuelson, 1980. "Heckscher-Ohlin Trade Theory with a Continuum of Goods," The Quarterly Journal of Economics, Oxford University Press, vol. 95(2), pages 203-224.
  24. Beata Smarzynska Javorcik, 2004. "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages," American Economic Review, American Economic Association, vol. 94(3), pages 605-627, June.
  25. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  26. Irene Brambilla & Daniel Lederman & Guido Porto, 2010. "Exports, Export Destinations, and Skills," NBER Working Papers 15995, National Bureau of Economic Research, Inc.
  27. Robert C. Feenstra & Gordon H. Hanson, 2004. "Ownership and Control in Outsourcing to China: Estimating the Property-Rights Theory of the Firm," NBER Working Papers 10198, National Bureau of Economic Research, Inc.
  28. Pinelopi Koujianou Goldberg & Amit Kumar Khandelwal & Nina Pavcnik & Petia Topalova, 2010. "Imported Intermediate Inputs and Domestic Product Growth: Evidence from India," The Quarterly Journal of Economics, Oxford University Press, vol. 125(4), pages 1727-1767.
  29. Gastanaga, Victor M. & Nugent, Jeffrey B. & Pashamova, Bistra, 1998. "Host Country Reforms and FDI Inflows: How Much Difference do they Make?," World Development, Elsevier, vol. 26(7), pages 1299-1314, July.
  30. Nunn, Nathan & Trefler, Daniel, 2013. "Incomplete contracts and the boundaries of the multinational firm," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 330-344.
  31. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-77, March.
  32. Wang, Jin, 2013. "The economic impact of Special Economic Zones: Evidence from Chinese municipalities," Journal of Development Economics, Elsevier, vol. 101(C), pages 133-147.
  33. Nunn, Nathan, 2007. "Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade," Scholarly Articles 4686801, Harvard University Department of Economics.
  34. David Hummels & Peter J. Klenow, 2005. "The Variety and Quality of a Nation's Exports," American Economic Review, American Economic Association, vol. 95(3), pages 704-723, June.
  35. Benjamin Gomes-Casseres, 1990. "Firm Ownership Preferences and Host Government Restrictions: An Integrated Approach," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 21(1), pages 1-22, March.
  36. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
  37. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-73, October.
  38. Debaere, Peter & Mostashari, Shalah, 2010. "Do tariffs matter for the extensive margin of international trade? An empirical analysis," Journal of International Economics, Elsevier, vol. 81(2), pages 163-169, July.
  39. Raymond Vernon, 1966. "International Investment and International Trade in the Product Cycle," The Quarterly Journal of Economics, Oxford University Press, vol. 80(2), pages 190-207.
  40. Basco, Sergi, 2013. "Financial development and the product cycle," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 295-313.
  41. Blanka Kalinova & Angel Palerm & Stephen Thomsen, 2010. "OECD's FDI Restrictiveness Index: 2010 Update," OECD Working Papers on International Investment 2010/3, OECD Publishing.
  42. Li, Zhiyuan, 2013. "Task offshoring and organizational form: Theory and evidence from China," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 358-380.
  43. Glass, Amy Jocelyn & Saggi, Kamal, 1998. "International technology transfer and the technology gap," Journal of Development Economics, Elsevier, vol. 55(2), pages 369-398, April.
  44. Kobrin, Stephen J., 1987. "Testing the bargaining hypothesis in the manufacturing sector in developing countries," International Organization, Cambridge University Press, vol. 41(04), pages 609-638, September.
  45. Bruce A. Blonigen & Alyson C. Ma, 2010. "Please Pass the Catch-Up: The Relative Performance of Chinese and Foreign Firms in Chinese Exports," NBER Chapters, in: China's Growing Role in World Trade, pages 475-509 National Bureau of Economic Research, Inc.
  46. Dave Donaldson & Richard Hornbeck, 2013. "Railroads and American Economic Growth: A "Market Access" Approach," NBER Working Papers 19213, National Bureau of Economic Research, Inc.
  47. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
  48. Feenstra, Robert & Kee, Hiau Looi, 2008. "Export variety and country productivity: Estimating the monopolistic competition model with endogenous productivity," Journal of International Economics, Elsevier, vol. 74(2), pages 500-518, March.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp7611. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.