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Export capacity constraints and distortions

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  • Feng, Xiao
  • Wang, Yongjin
  • Zhao, Laixun

Abstract

We investigate how export capacity constraints (ECCs) affect resource misallocation and aggregate productivity by distorting the firm's export mode. Using unique datasets in China, we first document a number of observed patterns for the so-called “dual-channel exporters”, which export only a fraction of their products directly with the rest via intermediaries. We show that introducing capacity constraints reconciles the theory with the observed patterns in the data. Our quantitative exercise suggests that removal of the ECCs leads to gains of 2.27% in aggregate productivity, 4.97% in total exports and 0.37% in national welfare.

Suggested Citation

  • Feng, Xiao & Wang, Yongjin & Zhao, Laixun, 2022. "Export capacity constraints and distortions," Journal of Development Economics, Elsevier, vol. 157(C).
    • Handle: RePEc:eee:deveco:v:157:y:2022:i:c:s0304387822000542
    DOI: 10.1016/j.jdeveco.2022.102889
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    More about this item

    Keywords

    Dual-channel exporters; Capacity constraint; Distortion; Resource misallocation;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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