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Factor Intensity, Product Switching, and Productivity: Evidence from Chinese Exporters

Yue Ma, Heiwai Tang and Yifan Zhang

No 9, Working Papers from Development and Policies Research Center (DEPOCEN), Vietnam

Abstract: This paper analyzes the causal relations between firms' productivity, factor intensity and export participation. Using propensity score matching techniques and firm-level panel data for Chinese manufacturing firms over the 1998-2007 period, we find strong evidence of domestic firms self-selecting into export markets with higher productivity ex ante, and enhanced productivity ex post. No such pattern is observed among foreign-invested ?rms. We also find that both domestic and foreign new exporters exploit China?s low labor costs and specialize in their core competence, that is, firms become less capital-intensive after exporting, relative to the matched non-exporting counterparts in the same industry. To rationalize these results that contrast with most findings in the existing literature, we develop a variant of the multi-product model of Bernard, Redding, and Schott (2010) to consider varying capital intensity across products. Using transaction-level export data, we find evidence that Chinese exporters add new products that are more labor-intensive than existing products and drop products that are less labor- intensive, supporting the model predictions. Firms with a bigger decline in capital intensity after exporting are found to have a larger increase in measured TFP.

Keywords: Exporters; Productivity; Factor Intensity; Multi-product Firms (search for similar items in EconPapers)
JEL-codes: F11 L16 O53 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2013
New Economics Papers: this item is included in nep-cna, nep-cse, nep-eff and nep-tra
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Related works:
Journal Article: Factor Intensity, product switching, and productivity: Evidence from Chinese exporters (2014) Downloads
Working Paper: Factor Intensity, Product Switching, and Productivity: Evidence from Chinese Exporters (2012) Downloads
Working Paper: Factor Intensity, Product Switching, and Productivity: Evidence from Chinese Exporters (2011) Downloads
Working Paper: Factor Intensity, Product Switching, and Productivity: Evidence from Chinese Exporters (2011) Downloads
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