Financial Crisis And Export Product Quality Mechanism Analysis And Empirical Work

Export product quality has becoming one of the key factors that could drive the transformation and upgrading of trade and the continuous economic growth, and this paper is trying to study the dynamics of China’s export quality from a new angle which is considering the financial crisis shock. After 30 years’ rapid but continuous expansion and prosperity, the orginal quantitive growth model of trade is becoming more and more unsustainable because of the rising labor costs and changing international situation. Recent research points out China’s trade are stepping into a new stage of quality-benefit growth model. Accordingly, academics start to carry out the study about the influential factors of export quality and have formed several kinds of theoretical and empirical methods, such as theory of demand similarity, Washington apple conjecture, North-South models and quality heterogeneous-firms trade model, while most of them mainly focus on factors like productivity, features of destination countries and external environment. As seen, existing literature is rarely conduct the research under the crisis condition, by which one could further explore the the paticular fluctuating path of quality.To study the mechanism of how financial crisis influence export quality, this paper firsly introduces the demand shock and supply shock of financial crisis into the equilibrium analysis of the theoretical model which is based on the productivity-quality heterogeneous model established by Hallak and Sivadasan (2009), and thus builds a theoretical framework which can be used to analyse the demand-supply combined effect of financial crisis on export quality. Secondly, using the custom office data from 2000 to 2011 (100mn high- disaggregate observations), and based on the IV and demand shift method, this paper estimate the most disaggregate export qualtity of China and thus, cross analyse the ovareall and subdivided quality dynamics. Besides, this paper use gravity model to study the stylized facts of the quanlity selection effect directly. Thirdly, this paper expands structural decomposition and survival analaysis method to do empirical analaysis and thus validate the theory predictions. Specifically, from statical margin perspective it studies the short-term net effect of financial crisis on export quality, and then from the dynamical cycle perspective to study the long-term net effect. The conclusions are as follows:(1)There are mainly two opposite forces working when financial crisis attackes the economy and export quality responds to it:the lipstick effect lowers the export quality while the reverse push effect pushes quality up. By introducting negative demand shock and chaning relative credict constraints into the two-dimensional heterogeneous model, chapter 3 reveals the comprehensive mechanism on how the external financial shocks influence firms’ export quality decisions. Negative demand shock makes customers prefer relative-low price products, and R&D investments are likely to be cut because of declining demand and profit, and both lead to bring down the export quality. For another, the supply shock which is mainly characterized by shrinking credit constraints upgrading export quality through optimization and elimination mechanims. Thus, financial crisis impact quality decision of firms complexly, and analysis in this part includes both above effect, laying substantial theoretical foundation of undserstanding the impact mechanism of financial crisis on export quality precisely.(2) This paper finds a slightly decline for total export quality after crisis, in which the medium-high tech industries, state-owned enterprises (SOEs) and joint venture enterprises (JVEs) suffered a negative impact under the shock, while low-tech industries and private domestic firms’ (PDFs) export quality increased after the crisis and its quality exceedes that of the SOE in the end of sample; the quality selection effect of PDF also reinforces signifigantly. Based on Chinese custom data and demand shifter method, chapter 4 firstly studies general facts of quality trends from the perspective of total, industry and ownership, trade mode, export mode and technical sophistication, and then distinguishes the selection effect as well as its evolution by using the expanded gravity model. It shows that export quality of industries with different technology sophistication and that of firms with different ownership respond to the financial crisis differently in all perspectives. Although it finds out a robust negative correlation between quality and distance which indicates effeiciency selection is still the dominat effect in China’s export market, the quality selection effect of PDF is strengthened as compare before crisis.(3) In the short term, the export quality decline of SOEs results from the across-firms reshuffling of intensive margin (incubents) under the lipstick effect while the increased export quality if PDFs is due to the upgrading of new entries’ quality of extensive margin (entries and exits) which is in consequence of reverse push effect. From the static trade margin perspective, chapter 5 decomposes the quality growth into four componets’ contribution (within firm upgrading, across firm reshuffling, entry and exit) and focus on the change of contribution under crisis. Studies show, negative shocks of crisis are reshuffling the market share from high quality trade relationships to low of that. SOEs tend to stay in the export market even the crisis makes them earn less, because majority of them have great export scale without any credit constraint. So the decrease of quality because of lipstick effect is bigger than the increase of quality due to reverse push effect. On the contrary, with the tightening financial contriants and slumping profit, PDFs who set low product price and then low quality can not afford to entry the fiercely competitive export market anymore, which leads to the quality increace of PDFs. Meanwhile, the scale of PDFs are smaller, so the quality increase drived by reverse push effect is greater than the decrease of quality incurred by lipstick effect.(4) In the long term, the quality upgrading period of SOEs shortenes on account of lipstick effect and the reverse push effect leads to the lengthening of quality upgrading period of PDFs. From dynamic periodic perspective, chapter 6 studies how the crisis influence the distribution of export quality period and caculate the quality upgrading constributions of firms in different export stage (entry, start-up, develop and mature). It finds out firms achieve the max export quality after they entry the export market 2.41-2.56 years, then exit the export market after another 1.11-1.24 years. Start-up firms, which are in the upgrading period of quality, contribute most no matter in view of absolute angle or relative angle. Total quality period of firms rises about 1.12%, and PDFs increase 5.76% while SOEs decrease 9.43%, which is the inevitable consequence of net short-term impact of lipstick and reverse push effect in a long run.