Impact of excess capacity on quality of export products: evidence from micro enterprise data
【Abstract】This paper investigates the impact of excess capacity on quality of export products by using highly-detailed Chinese customs data and Chinese industrial-enterprise data. It indicates that the smaller the scope for quality differentiation is, the larger the negative effects of excess capacity on export quality are. Furthermore, the lower enterprise’s productivity is, the larger negative impacts of excessive capacity on export quality are; the negative impacts of excessive capacity on local enterprises and lower-end products are more significant than that on foreign direct investment (FDI) enterprises and the high-end products. Therefore, differentiated policies should be adopted to deal with excessive capacity in enterprises and products with different characters.
【Keywords】 Excess capacity; export quality; homogeneity;
. (1)The data about elasticity of substitution of Broda and Weinstein (2006) were based on ten–digit HS code. This paper uses δ (median) on two–digit HS code. Tang and Zhang (2012), Fan and Li et al. (2015) adopted the same processing when using the δ of Broda and Weinstein (2006). [^Back]
. (2)Quality_ladder data come from Khandelwal (2010), the definition mode of which is the difference between the quality maximum and minimum of a same product. [^Back]
. (3)The median of quality variance is calculated by the author according to the sample of 2006. [^Back]
. (4)The enterprises of continuous export here refer to that with over–three–year export during the sample period, rather than that over–three–year uninterrupted export. [^Back]
. (5)Referring to the classification method suggested by Monova and Zhang (2012), rich countries of destination refer to the countries with per capita GDP above the median. The data of per capita GDP come from the World Bank’s World Development Indicators (WDI) database. [^Back]
Fan, H. & Guo, G. The Journal of World Economy (世界经济), (2): 58–85 (2015).
Gan, C., Zou, J. & Wang, J. China Industrial Economics (中国工业经济), (3): 44–56 (2015).
Study group of Policy Study on the Further Resolution of Excess Capacity of Development Research Center of the State Council, Management World (管理世界), (4): 1–10 (2015).
Han, G., Gao, T. & Wang, L. et al. Economic Research Journal (经济研究), (12): 18–31 (2011).
Han, G. & Hu, W. Modernization of Management (管理现代化), (6): 28–30 (2015).
Jiang, F., Geng, Q. & Lyu, D. et al. China Industrial Economics (中国工业经济), (6): 44–56 (2012).
Liu, H. & Sun, Z. China Industrial Economics (中国工业经济), (11): 5–17 (2014).
Liu, H., Wen, X. & Zhang, Y. Price: Theory & Practice (价格理论与实践), (9): 36–38 (2015).
Lin, Y., Wu, H. & Xing, Y. Economic Research Journal (经济研究), (10): 4–19 (2010).
Lu, F. Minutes of the 399th Symposium of Unirule Institute of Economics, (2010).
Nie, H., Jiang, T. & Yang, R. The Journal of World Economy (世界经济), (5): 142–158 (2012).
Tian, W. & Yu, S. Management World (管理世界), (1): 28–44 (2013).
Wang, L. & Ju, L. China Reform (改革), (12): 52–62 (2012).
Wei, H. Journal of International Trade (国际贸易问题), (4): 16–26 (2015).
Zhou, J. & Fu, B. The Journal of Economic Dynamics (经济学动态), (10): 58–64 (2011).
Antoniades A., (2015) “Heterogeneous Firms, Quality, and Trade,” Journal of International Economics 95 (2), 263–273.
Amiti M., Khandelwal A. K., (2013) “Import Competition and Quality Upgrading,” Review of Economics and Statistics 95(2), 476–490.
Broda C., Weinstein D. E., (2006) “Globalization and the Gains from Variety,” The Quarterly Journal of Economics 121(2), 541–585.
Bloom N., Draca M., Van Reenen J., (2015) “Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity,” Review of Economics and Statistics.
Brandt L., Van Biesebroeck J., Zhang Y., (2012) “Creative Accounting or Creative Destruction? Firm–level Productivity Growth in Chinese Manufacturing,” Journal of Development Economics 97(2), 339–351.
Conrad K., Veall M. R., (1991) “A Test for Strategic Excess Capacity,” Empirical Economics 16(4), 433–445.
De Vany A., Frey G., (1982) “Backlogs and the Value of Excess Capacity in the Steel Industry,” The American Economic Review 72(3), 441–451.
Fan H., Li Y. A., Yeaple S. R., (2015) “Trade Liberalization, Quality, and Export Prices,” Review of Economics and Statistics 97(5), 1033–1051.
Lacovone L., (2012) “The Better You Are the Stronger it Makes You: Evidence on the Asymmetric Impact of Liberalization,” Journal of Development Economics 99(2), 474–485.
Johnson R. C., (2012) “Trade and Prices with Heterogeneous Firms,” Journal of International Economics 86 (1), 43–56.
Khandelwal A., (2010) “The Long and Short of Quality Ladders,” The Review of Economic Studies 77(4), 1450–1476.
Lall S., (2000) “The Technological Structure and Performance of Developing Country Manufactured Exports, 1985–98,” Oxford Development Studies 28(3), 337–369.
Manova K., Zhang Z., (2012) “Export Prices Across Firms and Destinations,” Quarterly Journal of Economics 27(1), 379–436.
Olley G.S., Pakes A., (1990) “The Dynamics of Productivity in the Telecommunications Equipment Industry,” Econometrica 64(6), 1263–1297.
Tang H., Zhang Y., (2012) “Quality Differentiation and Trade Intermediation,” Social Science Research Network w2368660.
Verhoogen E., (2008) “Trade, Quality Upgrading, and Wage Inequality in the Mexican Manufacturing Sector,” Quarterly Journal of Economics 23(2), 489–530.