Trade and product market policies in upstream sectors and productivity in downstream sectors: Firm-level evidence from China

Maria Bas and Orsetta Causa

Journal of Comparative Economics, 2013, vol. 41, issue 3, 843-862

Abstract: This paper explores the heterogeneous productivity impact of trade, product market and financial market policies over the last decade in China. The paper makes a critical distinction between downstream and upstream industries, focusing on the indirect effects of regulation in upstream industries on firm performance in downstream manufacturing industries. We identify the differential effect of these policies on firm productivity growth depending on how far incumbents are relative to the technological frontier. Trade and product market reforms are found to deliver stronger gains for firms that are closer to the industry-level technological frontier, while the reverse holds for financial market reforms. The key conclusion that can be derived from the empirical analysis is that further product, trade and financial market reforms would bring substantial gains in China and could therefore speed up the convergence process. Taken at face value, the empirical estimates would imply that aligning product, trade and financial market regulation to the average level observed in OECD countries would bring aggregate manufacturing productivity gains of respectively 9%, 3% and 6.5% after 5years.

Keywords: Firm-level data; Productivity; Trade liberalisation; Product market reform; Financial liberalisation (search for similar items in EconPapers)
JEL-codes: D24 F13 L8 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:41:y:2013:i:3:p:843-862

DOI: 10.1016/j.jce.2013.01.010

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