Economics at your fingertips  

Heterogeneous effects of trade liberalisation on firm†level markups: Evidence from China

Xunyong Xiang, Feixiang Chen, Chun†Yu Ho and Wen Yue

The World Economy, 2017, vol. 40, issue 8, 1667-1686

Abstract: This paper analyses how trade liberalisation affects the markups of Chinese firms based on firm†level production data, highly disaggregated transaction†level product trade data and tariff data at the eight†digit Harmonised System (HS) level. Our results show that there is a pro†competition effect of output tariff reduction, that is decreasing output tariffs relate to a lower markup, and that there is a cost†reduction effect of input tariff reduction, that is decreasing input tariffs relate to a higher markup. Interestingly, there are heterogeneous effects of trade liberalisation on firm†level markups. The cost†reduction effect of input tariff reduction is partially offset by the competition effect of new firm entry in more†concentrated industries. Furthermore, there is a weaker effect of trade liberalisation on processing trade firms and state†owned enterprises. Finally, our results are robust to the use of an instrumental variable approach to control for the endogeneity of tariffs and sample selection.

Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0378-5920

Access Statistics for this article

The World Economy is currently edited by David Greenaway

More articles in The World Economy from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().

Page updated 2019-02-23
Handle: RePEc:bla:worlde:v:40:y:2017:i:8:p:1667-1686