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Do economic institutions matter for trade liberalization? Evidence from China’s Open Door Policy

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  • Fu, Tong

Abstract

Trade liberalization can promote export by inducing better resource allocation and more advanced technologies. Although the literature emphasizes the mechanism of geographic proximity, this paper identifies an institutional effect. Using infant mortality rate as an instrument that is irrelevant to export and geographic effects, we confirm that the openness due to China’s Open Door Policy promotes firm exports. We further document that the positive relationship between openness and firm exports is mediated by property rights protection and corporate autonomy, either of which reflects institutional quality at the constraint on the government’s strategic behavior. In particular, our estimates are robust to different samples, different estimation methods, and endogeneity bias.

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  • Fu, Tong, 2021. "Do economic institutions matter for trade liberalization? Evidence from China’s Open Door Policy," Research in International Business and Finance, Elsevier, vol. 55(C).
    • Handle: RePEc:eee:riibaf:v:55:y:2021:i:c:s0275531920309375
    DOI: 10.1016/j.ribaf.2020.101330
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    More about this item

    Keywords

    Trade liberalization; Firm exports; Property rights protection; Corporate autonomy;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

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