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Trade Liberalization and Embedded Institutional Reform: Evidence from Chinese Exporters

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

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 elimination of externally imposed export quotas. We find that the surge in export value and decline in export prices following quota removal is driven by net entry, and show that this dominance is inconsistent with use of a productivity-based allocation of quota licenses by the Chinese government. Our counterfactual implies that elimination of misallocated quotas raised the overall productivity gain of quota removal by 28 percent.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17524.

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Date of creation: Oct 2011
Date of revision:
Publication status: published as Amit K. Khandelwal & Peter K. Schott & Shang-Jin Wei, 2013. "Trade Liberalization and Embedded Institutional Reform: Evidence from Chinese Exporters," American Economic Review, American Economic Association, vol. 103(6), pages 2169-95, October.
Handle: RePEc:nbr:nberwo:17524
Note: ITI
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