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Domestic value added in exports: theory and firm evidence from China


  • Kee,Hiau Looi
  • Tang,Heiwai
  • Kee,Hiau Looi
  • Tang,Heiwai


China has defied the declining trend in domestic content in exports in many countries. This paper studies China?s rising domestic content in exports using firm- and customs transaction-level data. The approach embraces firm heterogeneity and hence reduces aggregation bias. The study finds that the substitution of domestic for imported materials by individual processing exporters caused China?s domestic content in exports to increase from 65 to 70 percent in 2000?2007. Such substitution was induced by the country?s trade and investment liberalization, which deepened its engagement in global value chains and led to a greater variety of domestic materials becoming available at lower prices.

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  • Kee,Hiau Looi & Tang,Heiwai & Kee,Hiau Looi & Tang,Heiwai, 2015. "Domestic value added in exports: theory and firm evidence from China," Policy Research Working Paper Series 7491, The World Bank.
  • Handle: RePEc:wbk:wbrwps:7491

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    References listed on IDEAS

    1. Cebeci, Tolga & Fernandes, Ana M. & Freund, Caroline & Pierola, Martha Denisse, 2012. "Exporter dynamics database," Policy Research Working Paper Series 6229, The World Bank.
    2. Ahn, JaeBin & Khandelwal, Amit K. & Wei, Shang-Jin, 2011. "The role of intermediaries in facilitating trade," Journal of International Economics, Elsevier, vol. 84(1), pages 73-85, May.
    3. Brandt, Loren & Van Biesebroeck, Johannes & Zhang, Yifan, 2012. "Creative accounting or creative destruction? Firm-level productivity growth in Chinese manufacturing," Journal of Development Economics, Elsevier, vol. 97(2), pages 339-351.
    4. Koopman, Robert & Wang, Zhi & Wei, Shang-Jin, 2012. "Estimating domestic content in exports when processing trade is pervasive," Journal of Development Economics, Elsevier, vol. 99(1), pages 178-189.
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    More about this item


    International Trade and Trade Rules; Transport and Trade Logistics; Industrial and Consumer Services and Products; Food&Beverage Industry; Plastics&Rubber Industry; Construction Industry; General Manufacturing; Common Carriers Industry; Business Cycles and Stabilization Policies; Textiles; Apparel&Leather Industry; Pulp&Paper Industry; Labor Markets;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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