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Managing Trade: Evidence from China and the US

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  • Nicholas Bloom
  • Kalina Manova
  • John Van Reenen
  • Stephen Teng Sun
  • Zhihong Yu

Abstract

We present a heterogeneous-firm model in which management ability increases both production efficiency and product quality. Combining six micro-datasets on management practices, production and trade in Chinese and American firms, we find broad support for the model's predictions. First, better managed firms are more likely to export, sell more products to more destination countries, and earn higher export revenues and profits. Second, better managed exporters have higher prices, higher quality, and lower quality-adjusted prices. Finally, they also use a wider range of inputs, higher quality and more expensive inputs, and imported inputs from more advanced countries. The structural estimates indicate that management is important for improving production efficiency and product quality in both countries, but it matters more in China than in the US, especially for product quality. Panel analysis for the US and a randomized control trial in India suggest that management exerts causal effects on product quality, production efficiency, and exports. Poor management practices may thus hinder trade and growth, especially in developing countries.

Suggested Citation

  • Nicholas Bloom & Kalina Manova & John Van Reenen & Stephen Teng Sun & Zhihong Yu, 2018. "Managing Trade: Evidence from China and the US," NBER Working Papers 24718, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:24718
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    2. Bloom, Nicholas & Iacovone, Leonardo & Pereira-López, Mariana & Van Reenen, John, 2022. "Management and Misallocation in Mexico," CEPR Discussion Papers 16979, C.E.P.R. Discussion Papers.
    3. Luca David Opromolla & Giordano Mion & Gianmarco I.P. Ottaviano, 2020. "Dream Jobs," GEE Papers 0153, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Jul 2020.
    4. Paulo Bastos & Joana Silva & Eric Verhoogen, 2018. "Export Destinations and Input Prices," American Economic Review, American Economic Association, vol. 108(2), pages 353-392, February.
    5. Ding, Haoyuan & Fan, Haichao & Jin, Yuying & Qi, Tong, 2022. "Talented overseas returnees and outward foreign direct investment," European Economic Review, Elsevier, vol. 148(C).
    6. David Atkin & Amit K. Khandelwal, 2020. "How Distortions Alter the Impacts of International Trade in Developing Countries," Annual Review of Economics, Annual Reviews, vol. 12(1), pages 213-238, August.
    7. Chiappini, Raphaël & Jégourel, Yves, 2021. "“The buck stops with the executives”: Assessing the impact of workforce composition and cultural distance on French firms’ exports," Economic Modelling, Elsevier, vol. 94(C), pages 45-57.
    8. Zhang, Yi & Liu, Chun & Wang, Ting, 2020. "Direct or indirect? The impact of political connections on export mode of Chinese private enterprises," China Economic Review, Elsevier, vol. 61(C).
    9. Chen, Cheng & Steinwender, Claudia, 2021. "Import competition, heterogeneous preferences of managers, and productivity," Journal of International Economics, Elsevier, vol. 133(C).
    10. Jin, Zhangfeng, 2021. "The Legacies of the Soviet Influence in the 1950s: China's 156 Major Industrial Projects," GLO Discussion Paper Series 932, Global Labor Organization (GLO).
    11. Li, Guangzhong & Egger, Peter H. & Li, Jie & Wu, Han, 2022. "Exporting firms’ factor and product-quality adjustments in response to employment protection legislation: Evidence from China," China Economic Review, Elsevier, vol. 73(C).
    12. Chen, Cheng, 2019. "Trade liberalization, agency problem and aggregate productivity," European Economic Review, Elsevier, vol. 111(C), pages 421-442.

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