Service liberalization and productivity in high‐tech firms: Evidence from China

Xuchao Li, Jing Zhao and Ruomeng Yang

Review of International Economics, 2024, vol. 32, issue 4, 1607-1644

Abstract: This article studies the relationship between service liberalization and the productivity of high‐tech manufacturing. Examining the sudden relaxation of FDI regulation in several service sectors in China, this article finds that service liberalization improves high‐tech firms' TFP. The effect is greater in non‐SOEs, firms with a higher degree of service dependence, and firms located in regions with better institutional environments. Furthermore, after service liberalization, high‐tech firms of all sizes have more outsourcing service expenditures and spend less on intermediate inputs. Only large‐sized high‐tech firms increase their R&D expenditures to improve production efficiency.

Date: 2024
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