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Importing under trade policy uncertainty: Evidence from China

Michele Imbruno ()

Journal of Comparative Economics, 2019, vol. 47, issue 4, 806-826

Abstract: This paper empirically explores the adjustment of imports to reductions in trade policy uncertainty (TPU), taking into account that firms may face large sunk costs when purchasing foreign goods. We investigate how product-level Chinese imports react to tariff binding arising from China's accession to the WTO, by distinguishing both country-related and firm-related margins. Our main results suggest that a decline in TPU allows access to a greater variety of foreign goods, that are also associated with higher quality. At the same time, tariff binding leads more Chinese producers and trade intermediaries to start importing, thus allowing a greater number of firms and consumers to enjoy potential gains from imports. Finally, we document heterogeneous TPU effects across firms with different ownership, as well as across products with different end use, revealing interesting insights into the context of global value chains.

Keywords: Trade policy uncertainty; Import behavior; World Trade Organization; Tariff binding; China (search for similar items in EconPapers)
JEL-codes: D22 F13 F14 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.jce.2019.06.004

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