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Contractual Versus Non-Contractual Trade: The Role of Institutions in China

  • Robert C. Feenstra
  • Chang Hong
  • Hong Ma
  • Barbara J. Spencer

Recent research has demonstrated the importance of institutional quality at the country level for both the volume of trade and the ability to trade in differentiated goods that rely on contract enforcement. This paper takes advantage of cross-provincial variation in institutional quality in China, and export data that distinguishes between foreign and domestic exporters and processing versus ordinary trade, to show that institutional quality is a significant factor in determining Chinese provincial export patterns. Institutions matter more for processing trade, and more for foreign firms, just as we would expect from a greater reliance on contracts in these cases.

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File URL: http://www.nber.org/papers/w17728.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17728.

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Date of creation: Jan 2012
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Publication status: published as 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.
Handle: RePEc:nbr:nberwo:17728
Note: ITI
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