IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/80946.html
   My bibliography  Save this paper

How Exporting Firms Respond to Technical Barriers to Trade?

Author

Listed:
  • Hu, Cui
  • Lin, Faqin
  • Tan, Yong
  • Tang, Yihong

Abstract

This paper investigates how Technical Barriers to Trade (TBT) affect firm export performance. The implementation of the “Children-Resistance” act (CR act) in the EU offers an ideal quasi-natural experiment to identify the causal effect of TBTs on firm performance. Using data on Chinese firms that export cigarette lighters between 2004 and 2008, empirical results show that firms that export to the EU not only adjust their product quality to meet the requirements in the CR act, but also upgrade their product quality in other dimensions. However, both the export value and export volume to the EU decline. At the same time, less productive exporters are forced to exit from the EU market. In addition, while the effect of the CR act on export quality is significant only in the implementation year, its impact on firm-level export scale last longer even after its implementation, which is referred to as a dynamic impact. Lastly, Heterogeneous effect of TBT is also documented.

Suggested Citation

  • Hu, Cui & Lin, Faqin & Tan, Yong & Tang, Yihong, 2017. "How Exporting Firms Respond to Technical Barriers to Trade?," MPRA Paper 80946, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:80946
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/80946/1/MPRA_paper_80946.pdf
    File Function: original version
    Download Restriction: no

    File URL: https://mpra.ub.uni-muenchen.de/81809/1/MPRA_paper_80946.pdf
    File Function: revised version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bee Yan Aw & Mark J. Roberts & Daniel Yi Xu, 2011. "R&D Investment, Exporting, and Productivity Dynamics," American Economic Review, American Economic Association, vol. 101(4), pages 1312-1344, June.
    2. repec:clu:wpaper:0708-12 is not listed on IDEAS
    3. Fontagné, Lionel & Orefice, Gianluca & Piermartini, Roberta & Rocha, Nadia, 2015. "Product standards and margins of trade: Firm-level evidence," Journal of International Economics, Elsevier, vol. 97(1), pages 29-44.
    4. Robert C. Feenstra & Shang-Jin Wei, 2010. "Introduction to "China's Growing Role in World Trade"," NBER Chapters, in: China's Growing Role in World Trade, pages 1-31, National Bureau of Economic Research, Inc.
    5. Hallak, Juan Carlos & Sivadasan, Jagadeesh, 2013. "Product and process productivity: Implications for quality choice and conditional exporter premia," Journal of International Economics, Elsevier, vol. 91(1), pages 53-67.
    6. Kalina Manova & Zhiwei Zhang, 2012. "Export Prices Across Firms and Destinations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(1), pages 379-436.
    7. Richard Baldwin & James Harrigan, 2011. "Zeros, Quality, and Space: Trade Theory and Trade Evidence," American Economic Journal: Microeconomics, American Economic Association, vol. 3(2), pages 60-88, May.
    8. Fontagné, Lionel & Orefice, Gianluca, 2018. "Let’s try next door: Technical Barriers to Trade and multi-destination firms," European Economic Review, Elsevier, vol. 101(C), pages 643-663.
    9. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
    10. Maurice Kugler & Eric Verhoogen, 2012. "Prices, Plant Size, and Product Quality," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(1), pages 307-339.
    11. Lu, Yi & Tao, Zhigang & Zhang, Yan, 2013. "How do exporters respond to antidumping investigations?," Journal of International Economics, Elsevier, vol. 91(2), pages 290-300.
    12. Alberto Portugal‐Perez & José‐Daniel Reyes & John S. Wilson, 2010. "Beyond the Information Technology Agreement: Harmonisation of Standards and Trade in Electronics," The World Economy, Wiley Blackwell, vol. 33(12), pages 1870-1897, December.
    13. Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 620-638, June.
    14. Hallak, Juan Carlos, 2006. "Product quality and the direction of trade," Journal of International Economics, Elsevier, vol. 68(1), pages 238-265, January.
    15. Hu, Cui & Lin, Faqin, 2016. "Product standards and export quality: Micro evidence from China," Economics Letters, Elsevier, vol. 145(C), pages 274-277.
    16. Carsten Eckel & J. Peter Neary, 2010. "Multi-Product Firms and Flexible Manufacturing in the Global Economy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(1), pages 188-217.
    17. Chad P. Bown, 2011. "Taking Stock of Antidumping, Safeguards and Countervailing Duties, 1990–2009," The World Economy, Wiley Blackwell, vol. 34(12), pages 1955-1998, December.
    18. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
    19. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(4), pages 1403-1448.
    20. Ahn, JaeBin & Khandelwal, Amit K. & Wei, Shang-Jin, 2011. "The role of intermediaries in facilitating trade," Journal of International Economics, Elsevier, vol. 84(1), pages 73-85, May.
    21. Zanardi, Maurizio, 2006. "Antidumping: A problem in international trade," European Journal of Political Economy, Elsevier, vol. 22(3), pages 591-617, September.
    22. Xiaohua Bao & Larry D. Qiu, 2012. "How Do Technical Barriers to Trade Influence Trade?," Review of International Economics, Wiley Blackwell, vol. 20(4), pages 691-706, September.
    23. Robert C. Feenstra & Shang-Jin Wei, 2010. "China's Growing Role in World Trade," NBER Books, National Bureau of Economic Research, Inc, number feen07-1.
    24. Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February.
    25. Haichao Fan & Yao Amber Li & Stephen R. Yeaple, 2015. "Trade Liberalization, Quality, and Export Prices," The Review of Economics and Statistics, MIT Press, vol. 97(5), pages 1033-1051, December.
    26. Costas Arkolakis & Arnaud Costinot & Andres Rodriguez-Clare, 2012. "New Trade Models, Same Old Gains?," American Economic Review, American Economic Association, vol. 102(1), pages 94-130, February.
    27. Maskus, Keith E. & Otsuki, Tsunehiro & Wilson, John S., 2005. "The cost of compliance with product standards for firms in developing countries: an econometric study," Policy Research Working Paper Series 3590, The World Bank.
    28. Mattias Ganslandt & James R. Markusen, 2001. "Standards and Related Regulations in International Trade: A Modeling Approach," NBER Working Papers 8346, National Bureau of Economic Research, Inc.
    29. Feenstra, Robert C. & Wei, Shang-Jin (ed.), 2010. "China's Growing Role in World Trade," National Bureau of Economic Research Books, University of Chicago Press, number 9780226239712.
    30. DU, Julan & LU, Yi & TAO, Zhigang & YU, Linhui, 2012. "Do domestic and foreign exporters differ in learning by exporting? Evidence from China," China Economic Review, Elsevier, vol. 23(2), pages 296-315.
    31. Fischer, Ronald & Serra, Pablo, 2000. "Standards and protection," Journal of International Economics, Elsevier, vol. 52(2), pages 377-400, December.
    32. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2010. "Multiple-Product Firms and Product Switching," American Economic Review, American Economic Association, vol. 100(1), pages 70-97, March.
    33. De Loecker, Jan, 2007. "Do exports generate higher productivity? Evidence from Slovenia," Journal of International Economics, Elsevier, vol. 73(1), pages 69-98, September.
    34. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 249-275.
    35. Amit K. Khandelwal & Peter K. Schott & Shang-Jin Wei, 2013. "Trade Liberalization and Embedded Institutional Reform: Evidence from Chinese Exporters," American Economic Review, American Economic Association, vol. 103(6), pages 2169-2195, October.
    36. Jens Matthias Arnold & Katrin Hussinger, 2005. "Export Behavior and Firm Productivity in German Manufacturing: A Firm-Level Analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 141(2), pages 219-243, July.
    37. XU, Bin & LU, Jiangyong, 2009. "Foreign direct investment, processing trade, and the sophistication of China's exports," China Economic Review, Elsevier, vol. 20(3), pages 425-439, September.
    38. Broda, Christian & Greenfield, Joshua & Weinstein, David E., 2017. "From groundnuts to globalization: A structural estimate of trade and growth," Research in Economics, Elsevier, vol. 71(4), pages 759-783.
    39. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-1721, September.
    40. Daniel Berkowitz & Hong Ma & Shuichiro Nishioka, 2017. "Recasting the Iron Rice Bowl: The Reform of China's State-Owned Enterprises," The Review of Economics and Statistics, MIT Press, vol. 99(4), pages 735-747, July.
    41. Maggie Xiaoyang Chen & John Wilson & Tsunehiro Otsuki, 2008. "Standards and export decisions: Firm-level evidence from developing countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 17(4), pages 501-523.
    42. Haichao Fan & Yao Amber Li & Stephen R. Yeaple, 2015. "Trade Liberalization, Quality, and Export Prices," The Review of Economics and Statistics, MIT Press, vol. 97(5), pages 1033-1051, December.
    43. Peter K. Schott, 2004. "Across-Product Versus Within-Product Specialization in International Trade," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(2), pages 647-678.
    44. David Hummels & Alexandre Skiba, 2004. "Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1384-1402, December.
    45. Thomas J. Prusa, 2021. "On the spread and impact of anti-dumping," World Scientific Book Chapters, in: Thomas J Prusa (ed.), Economic Effects of Antidumping, chapter 4, pages 45-65, World Scientific Publishing Co. Pte. Ltd..
    46. Han, Jun & Liu, Runjuan & Zhang, Junsen, 2012. "Globalization and wage inequality: Evidence from urban China," Journal of International Economics, Elsevier, vol. 87(2), pages 288-297.
    47. Tan, Yong & Han, Jian & Ma, Yeqing, 2015. "Multi-product firms, product scope, and the policy of export tax rebate," China Economic Review, Elsevier, vol. 35(C), pages 33-46.
    48. Cui Hu & Faqin Lin & Xiaosong Wang, 2016. "Learning from exporting in China," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 24(2), pages 299-334, April.
    49. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    50. repec:hal:spmain:info:hdl:2441/6apm7lruv088iagm4rv2c33jtg is not listed on IDEAS
    51. Aw, Bee Yan & Chung, Sukkyun & Roberts, Mark J, 2000. "Productivity and Turnover in the Export Market: Micro-level Evidence from the Republic of Korea and Taiwan (China)," The World Bank Economic Review, World Bank, vol. 14(1), pages 65-90, January.
    52. Avinash Dixit, 1989. "Hysteresis, Import Penetration, and Exchange Rate Pass-Through," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(2), pages 205-228.
    53. Alven H.S. Lam, 2000. "Republic of China (Taiwan)," American Journal of Economics and Sociology, Wiley Blackwell, vol. 59(5), pages 327-336, November.
    54. Mi Dai & Miaojie Yu, 2013. "Firm R&D, Absorptive Capacity and Learning by Exporting: Firm-level Evidence from China," The World Economy, Wiley Blackwell, vol. 36(9), pages 1131-1145, September.
    55. Sourafel Girma & Avid Greenaway & Richard Kneller, 2004. "Does Exporting Increase Productivity? A Microeconometric Analysis of Matched Firms," Review of International Economics, Wiley Blackwell, vol. 12(5), pages 855-866, November.
    56. Witold Czubala & Ben Shepherd & John S. Wilson, 2009. "Help or Hindrance? The Impact of Harmonised Standards on African Exports †," Journal of African Economies, Centre for the Study of African Economies, vol. 18(5), pages 711-744, November.
    57. Lin, Faqin & Sim, Nicholas C.S., 2013. "Trade, income and the Baltic Dry Index," European Economic Review, Elsevier, vol. 59(C), pages 1-18.
    58. Yi Lu, 2011. "Political connections and trade expansion," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 19(2), pages 231-254, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hu, Cui & Parsley, David & Tan, Yong, 2021. "Exchange rate induced export quality upgrading: A firm-level perspective," Economic Modelling, Elsevier, vol. 98(C), pages 336-348.
    2. Duc Anh Dang & Vuong Anh Dang, 2021. "The Effects of SPSs and TBTs on Innovation: Evidence from Exporting Firms in Viet Nam," Working Papers DP-2021-16, Economic Research Institute for ASEAN and East Asia (ERIA).
    3. Wei, Hao & Tu, Yue & Zhou, Peng, 2023. "Technical barriers to trade and export performance: Comparing exiting and staying firms," Economic Modelling, Elsevier, vol. 126(C).
    4. Xiaodan Hu & Yunhua Tian & Yanping Zhou & Lu Feng, 2021. "How Do China's Importing Firms Respond to Non‐tariff Measures?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 29(4), pages 89-112, July.
    5. DOAN Thi Thanh Ha & ZHANG Hongyong, 2022. "Technical Barriers to Trade, Product Quality and Trade Margins: Firm-level evidence," Discussion papers 22056, Research Institute of Economy, Trade and Industry (RIETI).
    6. Li, Haoran & Wan, Xibo & Zhang, Wendong, 2020. "How do Firms Respond to Political Tensions? Evidence from Chinese Food Importers," ISU General Staff Papers 202011250800001118, Iowa State University, Department of Economics.
    7. Yanyun Li & Faqin Lin, 2022. "Beyond tariff evasion: bypass effect of FTAs to circumvent technical barriers," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 158(4), pages 1085-1105, November.
    8. Shuyao Yang, 2020. "Technical Barriers to Trade and Firms' Export Decisions," CESifo Working Paper Series 8693, CESifo.
    9. Hea‐Jung Hyun & Yong Joon Jang, 2022. "Technical regulation and trade: Export quality matters," The World Economy, Wiley Blackwell, vol. 45(5), pages 1447-1476, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Manova, Kalina & Yu, Zhihong, 2017. "Multi-product firms and product quality," Journal of International Economics, Elsevier, vol. 109(C), pages 116-137.
    2. Anne‐Célia Disdier & Carl Gaigné & Cristina Herghelegiu, 2023. "Do standards improve the quality of traded products?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(4), pages 1238-1290, November.
    3. Meng, Ning & Milner, Chris & Song, Huasheng, 2020. "Antidumping and heterogeneous quality adjustment of multi-product firms: Evidence from Chinese exporters," Economic Modelling, Elsevier, vol. 92(C), pages 147-161.
    4. Melitz, Marc J. & Redding, Stephen J., 2014. "Heterogeneous Firms and Trade," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 1-54, Elsevier.
    5. Kalina Manova & Zhiwei Zhang, 2012. "Export Prices Across Firms and Destinations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(1), pages 379-436.
    6. Juan de Lucio & Raúl Mínguez & Asier Minondo & Francisco Requena, 2018. "The variation of export prices across and within firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 154(2), pages 327-346, May.
    7. Chen, Natalie & Juvenal, Luciana, 2016. "Quality, trade, and exchange rate pass-through," Journal of International Economics, Elsevier, vol. 100(C), pages 61-80.
    8. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2018. "Global Firms," Journal of Economic Literature, American Economic Association, vol. 56(2), pages 565-619, June.
    9. Bloom, Nick & Manova, Kalina & Teng Sun, Stephen & Van Reenen, John & Yu, Zhihong, 2018. "Managing trade: evidence from China and the US," LSE Research Online Documents on Economics 88703, London School of Economics and Political Science, LSE Library.
    10. Ma, Yue & Tang, Heiwai & Zhang, Yifan, 2014. "Factor Intensity, product switching, and productivity: Evidence from Chinese exporters," Journal of International Economics, Elsevier, vol. 92(2), pages 349-362.
    11. Irene Brambilla & Nicolas Depetris Chauvin & Guido Porto, 2017. "Examining the Export Wage Premium in Developing Countries," Review of International Economics, Wiley Blackwell, vol. 25(3), pages 447-475, August.
    12. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2012. "The Empirics of Firm Heterogeneity and International Trade," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 283-313, July.
    13. Lin, Faqin & Hu, Cui & Fuchs, Andreas, 2019. "How do firms respond to political tensions? The heterogeneity of the Dalai Lama Effect on trade," China Economic Review, Elsevier, vol. 54(C), pages 73-93.
    14. Crinò, Rosario & Ogliari, Laura, 2017. "Financial imperfections, product quality, and international trade," Journal of International Economics, Elsevier, vol. 104(C), pages 63-84.
    15. Olivier Cadot & Céline Carrère & Vanessa Strauss-Kahn, 2013. "Trade Diversification, Income, And Growth: What Do We Know?," Journal of Economic Surveys, Wiley Blackwell, vol. 27(4), pages 790-812, September.
    16. Crinò, Rosario & Ogliari, Laura, 2015. "Financial Frictions, Product Quality, and International Trade," CEPR Discussion Papers 10555, C.E.P.R. Discussion Papers.
    17. Saito, Hisamitsu, 2021. "Foreign direct investment and quality upgrading in Indonesian manufacturing," MPRA Paper 106770, University Library of Munich, Germany.
    18. Hu, Cui & Tan, Yong, 2016. "Export spillovers and export performance in China," China Economic Review, Elsevier, vol. 41(C), pages 75-89.
    19. Hallak, Juan Carlos & Sivadasan, Jagadeesh, 2013. "Product and process productivity: Implications for quality choice and conditional exporter premia," Journal of International Economics, Elsevier, vol. 91(1), pages 53-67.
    20. Dinopoulos, Elias & Unel, Bulent, 2013. "A simple model of quality heterogeneity and international trade," Journal of Economic Dynamics and Control, Elsevier, vol. 37(1), pages 68-83.

    More about this item

    Keywords

    Technical barriers to trade; Children-Resistant Act; Difference in differences;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:80946. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.