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Product Churning, Reallocation, and Chinese Export Growth

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  • Hu, Zhongzhong
  • Rodrigue, Joel
  • Tan, Yong
  • Yu, Chunhai

Abstract

This paper quantifies the separate contribution of idiosyncratic productivity and demand growth on aggregate Chinese exports. We develop firm, product, market and year specific measures of productivity and demand. We use these measures to document a number of novel findings that distinguish the growth of Chinese exports. First, we document that changes in demand explain nearly 78–89% of aggregate export growth, while only 11–22%of export growth is determined by productivity growth. Second, our results highlight two mechanisms which contribute significantly to aggregate export growth: the rapid reallocation of market shares towards products with growing demand, and high rates of product exit among low demand products. Investigating the mechanisms underlying these results we find that new exporters suffer demand shocks which are 66% smaller than those observed for incumbent producers in the same product market. By comparison, we find that there is only an 8% difference on average between the productivity of new and incumbent exporters.Repeating our exercise with revenue productivity reveals much smaller differences. This is largely attributed to differential movements in prices and marginal costs.

Suggested Citation

  • Hu, Zhongzhong & Rodrigue, Joel & Tan, Yong & Yu, Chunhai, 2017. "Product Churning, Reallocation, and Chinese Export Growth," MPRA Paper 82039, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:82039
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    3. Yoonyoung Cho & Zaineb Majoka, 2020. "Pakistan Jobs Diagnostic," World Bank Publications - Reports 33317, The World Bank Group.

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    More about this item

    Keywords

    Exports; China; Productivity; Demand;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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