China's Export Surge and the New Margins of Trade

We build a multi-sector spatial general equilibrium model to account for China’s export surge between 1990 and 2005. We focus on the role of the reductions in tariffs and internal migration costs during that period. Our model generates a closed-form aggregate trade elasticity that can be decomposed into four margins of adjustments. Two are the commonly studied intensive and extensive margins of exports (Chaney, 2008). The remaining two margins are the new-firm margin and the export-regime margin, for which we have found empirical support and used our reduced-form evidence to discipline the structural parameters. Using the calibrated model, we find that the reductions in tariffs and internal migration costs accounted for a third of China’s export growth between 1990 and 2005. Among the four margins, we find that the new-firm margin played an important role in amplifying the effect of these policy changes on export growth.