How political conflicts distort bilateral trade: Firm-level evidence from China

Yuhua Li, Ze Jian, Wei Tian and Laixun Zhao

Journal of Economic Behavior & Organization, 2021, vol. 183, issue C, 233-249

Abstract: We examine how political conflicts affect trade, using both the Goldstein score that scales all political conflicts daily worldwide and the firm-country-product level data of Chinese imports. We find that political conflicts reduce Chinese imports in general. Specifically, (i) the imports of State-owned enterprises (SOEs) are most reduced, and the effects mostly fall on imports of intermediate goods while not so much on capital goods; (ii) foreign-invested enterprises (FIEs) are less negatively affected, because most of their trade is processing, which is less negatively affected by political conflicts than ordinary trade. These results are obtained via mechanisms in the mode of trade (processing vs. ordinary), variations in broad economic categories (BEC) and import boycotts and export controls.

Keywords: Political conflicts; State-owned enterprises; Goldstein score; Import boycott; Export Control (search for similar items in EconPapers)
JEL-codes: F1 F51 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Working Paper: How Political Conflicts Distort Bilateral Trade: Firm-Level Evidence from China (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:183:y:2021:i:c:p:233-249

DOI: 10.1016/j.jebo.2021.01.003

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