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Trade Liberalization and Embedded Institutional Reform: Evidence from Chinese Exporters

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

Abstract

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.

Suggested Citation

  • Amit K. Khandelwal & Peter K. Schott & Shang-Jin Wei, 2011. "Trade Liberalization and Embedded Institutional Reform: Evidence from Chinese Exporters," NBER Working Papers 17524, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:17524
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    JEL classification:

    • F1 - International Economics - - Trade
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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