American Economic Review Vol. 107 No. 9 2017

WTO Accession and Performance of Chinese Manufacturing Firms

Loren Brandt¹; Johannes Van Biesebroeck²; Luhang Wang³; Yifan Zhang⁴

¹ Department of Economics, University of Toronto, 150 St. George Street, Toronto, ON M5S 3G7, Canada (email: ) · ² Department of Economics, KU Leuven, Naamsestraat 69, 3000 Leuven, Belgium, and CEPR (email: ) · ³ Department of International Economics and Trade, Xiamen University, Economics Building, 361005 Xiamen, China, and Wang Yanan Institute for Studies in Economics (email: ) · ⁴ Department of Economics, Chinese University of Hong Kong, Shatin, N.T., Hong Kong (email: )

Abstract

We examine the effects of trade liberalization in China on the evolution of markups and productivity of manufacturing firms. Although these dimensions of performance cannot be separately identified when firm output is measured by revenue, detailed price deflators make it possible to estimate the average effect of tariff reductions on both. Several novel findings emerge. First, cuts in output tariffs reduce markups, but raise productivity. Second, pro-competitive effects are most important among incumbents, while efficiency gains dominate for new entrants. Third, cuts in input tariffs raise both markups and productivity. We highlight mechanisms that explain these findings in the Chinese context.

DOI

10.1257/aer.20121266

Volume

107

Issue

9

Pages

2784-2820

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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