Effects of trade liberalization on export product quality: an empirical research based on China’s micro manufacturing enterprises

LIU Xiaoning1 LIU Lei2

(1.Institute for International Economics, Shandong Academy of Social Sciences)
(2.School of International Trade and Economics, Shandong University of Finance and Economics)

【Abstract】Using Chinese import tariff data, the industry business performance data and the customs import & export data, this paper explores the micro–level effects of trade liberalization on quality upgrading of export products and conducts an empirical test. The results show that trade liberalization has a positive effect on product quality upgrading of enterprises that are close to the world quality frontier, that is, the “escape-competition effect,” while it has a negative impact on product quality upgrading of enterprises that are far away from the world quality frontier, that is, the “discouragement effect”; seen from enterprises with different ownership, the impact of tariff reduction on export product quality of state-owned enterprises is not obvious. Tariff reduction brought about by trade liberalization cannot force state-owned enterprises’ products with low technology and quality to exit from the market; capital-intensive enterprises are obviously subject to the “escape-competition effect” compared with labor-intensive enterprises; product quality of processing trade enterprises is less affected by tariff reduction; among other enterprise-level heterogeneous factors, R&D investment is the most important positive factor.

【Keywords】 trade liberalization; export product quality; escape-competition effect; discouragement effect;

【DOI】

【Funds】 Youth Project of the National Social Sciences Fundation of China (13CJL036) Youth Project of the National Social Sciences Fundation of China (15CJL049)

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    Footnote

    [1]. ① Data source: http://tariffdata.wto.org/ReportersAndProducts.aspx. [^Back]

    [2]. ② Data source: http://unstats.un.org/unsd/cr/registry/regdnld.asp?Lg=1. [^Back]

    [3]. ③ Since each GB 4-digit industry corresponds to a plurality of HS 4-digit industries, this paper takes the average tax rate. [^Back]

    [4]. ④ Wherein the data of the industry coded 38, that is. the “electrical machinery and equipment manufacturing,” is missing. [^Back]

    [5]. ⑤ As many indicators of the year 2004 are missing in the China Industry Business Performance Data, thus the samples for this year are deleted. [^Back]

    [6]. ⑥ Theoretically, the industrial added value indicators can be negative; however, considering that logarithm needs to be taken in the measurement about productivity, which will also lead to the sample missing of these negative industrial added values, so they are directly deleted here. [^Back]

    [7]. ⑦ As long as the enterprise meets one of the above conditions in any one of the examined years, it will be deleted. [^Back]

    [8]. ⑧ As professional trading companies belong to the service industry, thus they are not in the statistical range of the industrial enterprises database. [^Back]

    [9]. ⑨ There are 15 types of the mode of trade variable in the China Customs Import & Export Database The paper deems processing trade of imported material and processing and assembling trade with customers material as two processing trade. An enterprise can both engage in processing trade and in general trade, even in various trade in different years. The paper regards enterprise that engaged in processing trade as processing trade enterprises. [^Back]

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This Article

ISSN:1002-4670

CN: 11-1692/F

Vol , No. 08, Pages 14-23

August 2015

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Article Outline

Abstract

  • 1 Introduction
  • 2 Theoretical hypothesis
  • 3 Measurement model and data description
  • 4 Empirical analysis and robustness testing
  • 5. Conclusion
  • Footnote

    References