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Input trade liberalization and import switching: Evidence from Chinese firms

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  • Wei Tian
  • Miaojie Yu

Abstract

This paper investigates how input liberalization affects firm import behavior. Using comprehensive production and trade data of Chinese firms, the paper shows that firms switch import sources from developing countries to developed countries as Chinese input tariffs fall. This finding is evident for import value and import scope. The observation holds after excluding the possible influence of reducing processing trade. The paper further demonstrates that the mechanism can be attributed to quality upgrading and innovation led by input cost reductions. The analysis handles the possible endogeneity problem, and the findings are robust and significant to different empirical methodologies and measurements.

Suggested Citation

  • Wei Tian & Miaojie Yu, 2019. "Input trade liberalization and import switching: Evidence from Chinese firms," Review of International Economics, Wiley Blackwell, vol. 27(4), pages 1002-1020, September.
    • Handle: RePEc:bla:reviec:v:27:y:2019:i:4:p:1002-1020
    DOI: 10.1111/roie.12410
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    Cited by:

    1. Sourafel Girma & Holger Görg, 2022. "Productivity effects of processing and ordinary export market entry: A time‐varying treatments approach," Review of International Economics, Wiley Blackwell, vol. 30(3), pages 836-853, August.
    2. Muhammad Zeshan, 2023. "Trade, Industry and Competition in Pakistan," PIDE-Working Papers 2023:15, Pakistan Institute of Development Economics.
    3. Xiong, Mengxu & Zhu, Ling, 2023. "Mandatory pollution abatement and firm export product quality," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1-12.
    4. Liu, Nan, 2020. "Trade war from the Chinese trenches," MPRA Paper 110175, University Library of Munich, Germany.
    5. Xianhai Huang & Yi Wang & Zhujun Zhu & Xueyin Song, 2022. "Quality of imported intermediates, innovation behaviour and markups: Firm‐level evidence from China," The World Economy, Wiley Blackwell, vol. 45(9), pages 2796-2819, September.
    6. Zhang, Hongsheng & Wei, Yueling & Ma, Shuzhong, 2021. "Overcoming the “Solow paradox”: Tariff reduction and productivity growth of Chinese ICT firms," Journal of Asian Economics, Elsevier, vol. 74(C).
    7. Dongmin Kong & Mengxu Xiong, 2021. "Unintended consequences of tax incentives on export product quality: Evidence from a natural experiment in China," Review of International Economics, Wiley Blackwell, vol. 29(4), pages 802-837, September.

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