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Cost and Product Advantages: A Firm-level Model for the Chinese Exports and Industry Growth

Jordi Jaumandreu () and Heng Yin

No 11862, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We use data from 70,000 Chinese manufacturing firms, which are both domestic sellers and exporters, to estimate the joint distribution of unobserved productivity (cost advantages) and unobserved demand heterogeneity (product advantages) from 1998 to 2008. Product advantages are negatively correlated with cost advantages (positively correlated with marginal cost). We characterize growth and sketch examples to show that splitting the advantages produces useful analytical insights. The state is not good at developing product advantages. A fraction of firms specialize in low-cost-low-quality exports. Many marginal cost differences across firms come from heterogeneous output-embodied levels of quality and technology, not "price distortions."

Keywords: cost advantages; demand heterogeneity; product advantages; productivity (search for similar items in EconPapers)
JEL-codes: C33 D24 L11 O30 O47 (search for similar items in EconPapers)
Date: 2017-02
New Economics Papers: this item is included in nep-bec, nep-eff, nep-int and nep-tra
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