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Exports, Misallocation, and Total Factor Productivity of Furniture Enterprises

Chang Xu (), Jianbing Guo (), Baodong Cheng () and Yu Liu ()
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Chang Xu: School of Economics and Management, Beijing Forestry University, Beijing 100083, China
Jianbing Guo: School of Agricultural Economics and Rural Development, Renmin University of China, Beijing 100872, China
Baodong Cheng: School of Economics and Management, Beijing Forestry University, Beijing 100083, China
Yu Liu: Institutes of Science and Development, Chinese Academy of Sciences, Beijing 100190, China

Sustainability, 2019, vol. 11, issue 18, 1-14

Abstract: With the increase in labor costs in China and the tremendous changes in the international trade environment, upgrading the total factor productivity of Chinese furniture export enterprises faces a great challenge. Lots of studies have explored the interaction of exports or misallocation on the total factor productivity (TFP) of furniture enterprises, however, there is little knowledge on the impact and interaction of both exports and misallocation on the TFP. Based on panel data of Chinese furniture enterprises, this paper measures the TFP and the distortion of labor and capital resources in Chinese furniture enterprises. A two-way fixed-effects model is used to analyze the impact of exports and misallocation on the TFP of Chinese furniture enterprises. The paper reveals several important findings. First, the TFP of Chinese furniture export enterprises is lower than that of non-export enterprises, this phenomenon is called the “export–productivity paradox”. Chinese furniture export enterprises are processing trade-oriented and labor-intensive enterprises at the low end of the value chain, exports have a negative effect on improving the TFP of furniture enterprises in the short term. Second, the distortion of labor and capital resources in Chinese furniture enterprises promotes improvements to the TFP of furniture enterprises rather than reducing the TFP of furniture enterprises. Last but not the least, we find that misallocation has a positive moderating effect on exports and can weaken the negative impact of exports on TFP by the “forced mechanism”, which is that the higher the distortion of the misallocation, the higher the cost of acquiring capital and labor, and enterprises are forced to enhance their productivity when facing market competition, thus promoting improvements to the TFP of furniture enterprises.

Keywords: exports; misallocation; total factor productivity; furniture enterprise (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2019
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