Impact of excess capacity on quality of export products: evidence from micro enterprise data

GAO Xiaona1 LAN Yisheng1

(1.School of International Business Administration of Shanghai University of Finance and Economics)

【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;


【Funds】 Supported by Graduate Innovation Fund Project of Shanghai University of Finance and Economics (CXJJ-2014-361).

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    [1]. (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]. (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]. (3)The median of quality variance is calculated by the author according to the sample of 2006. [^Back]

    [4]. (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]. (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]


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This Article


CN: 11-1692/F

Vol , No. 10, Pages 50-61

October 2016


Article Outline


  • Introduction
  • 1 Theoretical hypotheses
  • 2 Model design and data specification
  • 3 Empirical results
  • 4 Conclusions and policy recommendations
  • Footnote