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

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

Abstract

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.

Suggested Citation

  • 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

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    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. 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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    Cited by:

    1. Prema-chandra Athukorala & John Ravenhill, 2016. "China's evolving role in global production networks: the decoupling debate revisited," Departmental Working Papers 2016-12, The Australian National University, Arndt-Corden Department of Economics.
    2. Marcato, Marilia Bassetti & Dweck, Esther & Montanha, Rafael, 2022. "The densification of Chinese production chains in the context of vertically fragmented production," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 75-89.
    3. Marilia Marcato & Carolina Baltar & Fernando Sarti, 2019. "International competitiveness in a vertically fragmented production structure: empirical challenges and evidence," Economics Bulletin, AccessEcon, vol. 39(2), pages 876-893.
    4. Arne J. Nagengast & Robert Stehrer, 2016. "The Great Collapse in Value Added Trade," Review of International Economics, Wiley Blackwell, vol. 24(2), pages 392-421, May.
    5. Neha Gupta, 2016. "Domestic Value-added Growth is Vital," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 17(2), pages 271-294, September.
    6. José de Sousa & Laura Hering & Sandra Poncet, 2015. "Has trade openness reduced pollution in China?," Working Papers 2015-11, CEPII research center.
    7. Handley, Kyle & Limão, Nuno, 2013. "Policy Uncertainty, Trade and Welfare: Theory and Evidence for China and the U.S," CEPR Discussion Papers 9615, C.E.P.R. Discussion Papers.
    8. Han, Wontae & Wang, Jian & Wang, Xiao, 2022. "FDI and firm productivity in host countries: The role of financial constraints," Journal of International Money and Finance, Elsevier, vol. 124(C).
    9. Längle, Katharina & Xu, Ankai & Tian, Ruijie, 2021. "Assessing the supply chain effect of natural disasters: Evidence from Chinese manufacturers," WTO Staff Working Papers ERSD-2021-13, World Trade Organization (WTO), Economic Research and Statistics Division.
    10. Heiwai Tang & Fei Wang & Zhi Wang, 2016. "Extending the Input-Output Table Based on Firm-level Data," CESifo Working Paper Series 5811, CESifo.
    11. Dai, Mi & Maitra, Madhura & Yu, Miaojie, 2016. "Unexceptional exporter performance in China? The role of processing trade," Journal of Development Economics, Elsevier, vol. 121(C), pages 177-189.
    12. Hao Wei, 2016. "Measuring the Technological Structure of Chinese Imports," Review of Development Economics, Wiley Blackwell, vol. 20(1), pages 261-271, February.

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