How Did China’s WTO Entry Affect U.S. Prices?

Mary Amiti, Mi Dai, Robert Feenstra and John Romalis

No 23487, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We analyze the effects of China’s rapid export expansion following WTO entry on U.S. prices, exploiting cross-industry variation in trade liberalization. Lower input tariffs boosted Chinese firms’ productivity, lowered costs, and, in conjunction with reduced U.S. tariff uncertainty, expanded export participation. We find that China’s WTO entry significantly reduced variety-adjusted U.S. manufacturing price indexes between 2000 and 2006. For the Chinese components of these indexes, one third of the beneficial impact comes from Chinese exporters lowering their prices, while two-thirds of the beneficial impact comes from the entry of new Chinese exporters. China’s WTO entry also led other countries exporting to the U.S. to lower their prices, which was partly offset by exit of these exporters. We find that this impact on competitor countries’ prices is primarily explained by the reduction in China’s own input tariffs, so that policy action becomes the largest source of welfare gain for the United States from China’s WTO entry.

JEL-codes: F12 F14 (search for similar items in EconPapers)
Date: 2017-06
New Economics Papers: this item is included in nep-cna and nep-int
Note: ITI
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Citations: View citations in EconPapers (4)

Published as Mary Amiti & Mi Dai & Robert C. Feenstra & John Romalis, 2020. "How did China's WTO entry affect U.S. prices?," Journal of International Economics, .

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