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The Role of Firm Factors in Demand, Cost, and Export Market Selection for Chinese Footwear Producers

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  • Mark J. Roberts
  • Daniel Yi Xu
  • Xiaoyan Fan
  • Shengxing Zhang

Abstract

In this paper we use micro data on both trade and production for a sample of large Chinese manufacturing firms in the footwear industry from 2002-2006 to estimate an empirical model of export demand, pricing, and market participation by destination market. We use the model to construct indexes of firm-level demand, cost, and export market profitability. The empirical results indicate substantial firm heterogeneity in both the demand and cost dimensions with demand being more dispersed. The firm-specific demand and cost components are very useful in explaining differences in the extensive margin of trade, the length of time a firm exports to a destination, and the number and mix of destinations, as well as the export prices, while cost is more important in explaining the quantity of firm exports on the intensive margin. We use the estimates to analyze the reallocation resulting from removal of the quota on Chinese footwear exports to the EU and find that it led to a rapid restructuring of export supply sources in favor of firms with high demand and low cost indexes.

Suggested Citation

  • Mark J. Roberts & Daniel Yi Xu & Xiaoyan Fan & Shengxing Zhang, 2012. "The Role of Firm Factors in Demand, Cost, and Export Market Selection for Chinese Footwear Producers," NBER Working Papers 17725, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:17725
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    References listed on IDEAS

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    Cited by:

    1. Wei, Shang-Jin & Wei, Ziru & Xu, Jianhuan, 2014. "Assessing Market Failures in Export Pioneering Activities: A Structural Estimation Approach," CEPR Discussion Papers 10187, C.E.P.R. Discussion Papers.
    2. Peters, Bettina & Roberts, Mark J. & Vuong, Van Anh & Fryges, Helmut, 2013. "Estimating dynamic R&D demand: An analysis of costs and long-run benefits," ZEW Discussion Papers 13-089, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    3. Cherkashin, Ivan & Demidova, Svetlana & Kee, Hiau Looi & Krishna, Kala, 2015. "Firm heterogeneity and costly trade: A new estimation strategy and policy experiments," Journal of International Economics, Elsevier, vol. 96(1), pages 18-36.
    4. Colin J. Hottman & Stephen J. Redding & David E. Weinstein, 2016. "Quantifying the Sources of Firm Heterogeneity," The Quarterly Journal of Economics, Oxford University Press, vol. 131(3), pages 1291-1364.
    5. Munch, Jakob R. & Nguyen, Daniel X., 2014. "Decomposing firm-level sales variation," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 317-334.
    6. Simon Gilchrist & Raphael Schoenle & Jae Sim & Egon Zakrajšek, 2017. "Inflation Dynamics during the Financial Crisis," American Economic Review, American Economic Association, vol. 107(3), pages 785-823, March.
    7. Valeria SMEETS & Sharon TRAIBERMAN & Frederic WARZYNSKI, 2014. "Offshoring and the Shortening of the Quality Ladder: Evidence from Danish Apparel," Working Papers DP-2014-12, Economic Research Institute for ASEAN and East Asia (ERIA).
    8. A. Kerem Co?ar & Pablo D. Fajgelbaum, 2016. "Internal Geography, International Trade, and Regional Specialization," American Economic Journal: Microeconomics, American Economic Association, vol. 8(1), pages 24-56, February.
    9. Hottman, Colin & Redding, Stephen & Weinstein, David E., 2014. "What is 'firm heterogeneity' in trade models? The role of quality, scope, markups and cost," LSE Research Online Documents on Economics 60448, London School of Economics and Political Science, LSE Library.
    10. Myrto Kalouptsidi, 2014. "Detection and Impact of Industrial Subsidies: The Case of World Shipbuilding," NBER Working Papers 20119, National Bureau of Economic Research, Inc.
    11. Gan, Li & Hernandez, Manuel A. & Ma, Shuang, 2016. "The higher costs of doing business in China: Minimum wages and firms' export behavior," Journal of International Economics, Elsevier, vol. 100(C), pages 81-94.
    12. Valerie Smeets & Sharon Traiberman & Frederic Warzynski, 2013. "Offshoring and Patterns of Quality Growth: Evidence from Danish Apparel," Economics Working Papers 2013-25, Department of Economics and Business Economics, Aarhus University.

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    JEL classification:

    • F1 - International Economics - - Trade
    • L0 - Industrial Organization - - General

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