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WTO Accession and Performance of Chinese Manufacturing Firms

Loren Brandt (), Johannes Van Biesebroeck (), Luhang Wang and Yifan Zhang ()

American Economic Review, 2017, vol. 107, issue 9, 2784-2820

Abstract: We examine the effects of trade liberalization in China on the evolution of markups and productivity of manufacturing firms. Although these dimensions of performance cannot be separately identified when firm output is measured by revenue, detailed price deflators make it possible to estimate the average effect of tariff reductions on both. Several novel findings emerge. First, cuts in output tariffs reduce markups, but raise productivity. Second, pro-competitive effects are most important among incumbents, while efficiency gains dominate for new entrants. Third, cuts in input tariffs raise both markups and productivity. We highlight mechanisms that explain these findings in the Chinese context.

JEL-codes: D24 F13 L25 L60 O14 P31 P33 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/aer.20121266
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