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Trading textiles along the new silk route: The impact on Pakistani firms of gaining market access to China

Nida Jamil, Theresa Chaudhry and Azam Chaudhry

Journal of Development Economics, 2022, vol. 158, issue C

Abstract: In this study, we analyze the impact of the lower Chinese tariffs on Pakistani textile manufacturers that resulted from the Pakistan-China Free Trade Agreement (FTA). As a result of lower Chinese tariffs, Pakistani textile manufacturers increased exports though the number of firms exporting to China changed marginally and only in the spinning sector did exports substantially rise. Using a variety of recently developed methodologies, our results indicate that the productivity of textile manufacturers rose 3-8 percent and product quality rose 1-2 percent. Firms reduced product offerings in response to tariff drops. In contrast to a number of previous studies where exporting was accompanied by investment or R&D, exporters to China increased material and labor inputs but not capital. Non-exporters' productivity and quality also rose, indicating the presence of spillovers. Testing this, we find that these spillovers occurred for non-exporters downstream from higher productivity exporters in close geographic proximity.

Keywords: Trade liberalization; Export tariffs; Free trade agreements; Productivity; Production function estimation (search for similar items in EconPapers)
JEL-codes: D22 D24 F14 L11 L67 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.jdeveco.2022.102935

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