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Processing Trade, Productivity and Prices: Evidence from a Chinese Production Survey

Yao Li (), Valerie Smeets () and Frédéric Warzynski
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Valerie Smeets: Department of Economics and Business Economics, Aarhus University, Denmark, Postal: 8210 Aarhus V, Denmark

Economics Working Papers from Department of Economics and Business Economics, Aarhus University

Abstract: In this paper, we use a detailed production survey in the Chinese manufacturing industry to estimate both revenue and physical productivity and relate our measurements to firms' trade activity. We find that Chinese exporters for largely export oriented products like leather shoes or shirts appear to be less efficient than firms only involved on the domestic market based on the standard revenue productivity measure. However, we show strong positive export premium when we instead consider physical productivity. The simple and intuitive explanation of our results is that exporters charge on average lower prices. We focus more particularly on the role of processing trade and find that price differences are especially (and probably not surprisingly) large for firms involved in this type of contractual arrangements.

Keywords: Productivity; prices; processing trade; China (search for similar items in EconPapers)
JEL-codes: L2 D2 F14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-eff and nep-int
Date: 2017-11-23
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Working Paper: Processing Trade, Productivity and Prices: Evidence from a Chinese Production Survey (2018) Downloads
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