Research On Institutional Factors Of Comparative Advantage Of Chinese Manufacturing

Currently, all researchers around the world have noticed broader scope of comparative advantages, in which, logical institutional arrangement is a superior intangible factor, and the dynamic adjustment of institution has become a significant source for all countries to promote their trade and comparative advantages. Facing the pressure from changing the way foreign trade develops, China’s manufacturing industry is at a transition period, and it urgently needs to propel balanced growth and structure optimization of assorted factors by institutional reform and eventually finds a new way to strengthen its comparative advantages. According to new institutional economics, rational market participants focus on maintaining existing ownership and pursuing residual equity, and good institution should protect their reasonable pursuit while regulate unreasonable pursuit. Enterprises are the most basic market participants. Manufacturing enterprises undertake production and operation in both interior and exterior environments, by inputting intermediate goods, production factors and public goods, they earn profits. There are several ways such as enterprise level, market level and country level, in which institutional variable can have impact on how much enterprises would input intermediate goods, production factors and public goods. The institution supplier of the three levels are respectively upstream and downstream enterprises, factor market and national public policies, while enterprises remain the final decision-maker and benefited subject under all institution arrangements. Through the impact on generalized transaction cost, institution of all levels acts on the productivity and export will and capability. Further, the improvement of the comparative advantage of a country’s manufacturing industry should be based on farthest reducing generalized transaction cost; thus institution is crucial for the comparative advantage of manufacturing industry.After reviewing literatures and establishing theoretical framework for the whole thesis, I chiefly focus on how and how well institution can influence the comparative advantages of manufacturing industry. By theoretical and empirical analysis, I discuss this from three aspects namely enterprise level, market level and country level. Then, combining transformation of trade development pattern of China, I comprehensively analyze how to accomplish the transformation of factor structure of foreign trade, market distribution and mode of trade by logically arranging institution.In Chapter4,I research the impact institution have upon comparative advantage from an angel of enterprise. Respectively, I construct two kinds of theoretical frameworks to analyze how the adequacy and intensity of market factor and organization factor affect the export advantage of manufacturing industry. I draw a conclusion in this chapter that a country has comparative advantage on products that use its adequate factors. I conduct empirical analysis which suggests that market factor has a positive impact on the export advantage of all regions in China, while organization factor has a negative impact on it.In Chapter5,I research the impact institution have upon comparative advantage from an angel of market. By building a2x2x2model, I analyze how factor prices distortion and its corrective measures can influence comparative advantage. I conclude in this chapter that a country’s institution aiming at regulating factor prices distortion would have different effects on comparative advantage as the distortion is changing. By using panel data of all China’s regions, I conduct empirical analysis which suggests that, as institutional variables, when financial marketization which aims at correcting capital prices distortion and labor protection which aims at correcting labor prices distortion are getting more and more adequate, they tend to have negative influence on the comparative advantage of manufacturing industry, and in addition, as the distortion is becoming serious, this negative influence will become evident.In Chapter6,I research the impact institution have upon comparative advantage from an angel of country. I analyze how the country’s institutional arrangement can affect comparative advantage through a central-local government game model, concluding that the expansion of revenue above the line and tax source of local government helps the development of trade benefits and comparative advantage, while monopoly and corruption will reduce this enhancement. By using time series data of all China, I conduct empirical analysis which suggests that, monopoly and corruption would hinder the positive effect fiscal decentralization has on comparative advantage, aggravating the negative effect local competition has on comparative advantage.In Chapter7, taking transformation of trade development pattern of China in account, I comprehensively analyze the policy implication for every conclusion in all chapters and discuss how to adjust and improve the institutional arrangement from enterprise level, market level and country level to make it a support for enhancing trade benefits and comparative advantage. At last, I provide conclusion and orientation of further research for the whole thesis.