The impact of tariff reductions on firm dynamics and productivity in China: Does market-oriented transition matter?

Qilin Mao and Bin Sheng

China Economic Review, 2017, vol. 45, issue C, 168-194

Abstract: This paper investigates the impact of trade liberalization on firm dynamics and productivity in the context of dramatic tariff reductions after China's accession to the WTO, and how this impact varies across regions with different marketization levels. Our results show that (a) on average, output tariff reductions tend to reduce firm entry rate and increase firm exit rate, while input tariff reductions help to increase both firm entry rate and exit rate, furthermore, regional marketization strengthens the impact of trade liberalization on firm dynamics; (b) trade liberalization exerts greater impact on the likelihood of exit for the least productive firms while it tends to reduce the probability of exit for the more productive firms, with regional marketization strengthening such a reallocation process of trade liberalization; (c) firm dynamics effect contributes approximately 43% of the growth of productivity, and it (especially the firm exit effect) is an important channel through which trade liberalization fosters productivity growth, and domestic market reform is found to strengthen such an impact.

Keywords: Tariff reductions; Firm dynamics; Aggregate productivity; Marketization (search for similar items in EconPapers)
JEL-codes: F13 O24 O47 P30 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1043951X17301025
Full text for ScienceDirect subscribers only

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: https://EconPapers.repec.org/RePEc:eee:chieco:v:45:y:2017:i:c:p:168-194

DOI: 10.1016/j.chieco.2017.07.011

Access Statistics for this article

China Economic Review is currently edited by B.M. Fleisher, K. X. D. Huang, M.E. Lovely, Y. Wen, X. Zhang and X. Zhu

More articles in China Economic Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().