WTO Accession and Performance of Chinese Manufacturing Firms
Loren Brandt, Johannes Van Biesebroeck, Luhang Wang, Yifan Zhang
American Economic Review 2017, 107(9): 2784–2820
2381 20181010 (published) Views:28646
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.
JEL-Codes: D24, F13, L25, L60, O14, P31, P33

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