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Importing under trade policy uncertainty: Evidence from China

Michele Imbruno ()

Working Papers from HAL

Abstract: This paper empirically explores imports' adjustment to reductions in trade policy uncertainty (TPU) considering that firms may face large sunk costs to purchase foreign goods. We investigate how product-level Chinese imports react to tariff binding connected to China's accession to WTO, through distinguishing both country-related margins and firm-related margins. Our main results suggest that a decline in TPU allows the access to a greater variety of foreign goods, associated also with a higher quality. At the same time, tariff binding leads more Chinese producers and trade intermediaries to start importing, allowing more firms and consumers to enjoy potential gains from imports. Finally, we document heterogeneous TPU effects across firms with different ownership, and products with different end use, revealing interesting insights in a context of global value chains.

Keywords: World Trade Organization; Import behaviour; Trade policy uncertainty; Tariff binding; China (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cna, nep-int and nep-tra
Date: 2018-06-26
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