Trade Liberalization, Heterogeneity And Firm Dynamics:Empirical Study Based On Chinese Manufacturing Firms

In order to speed up the market economic system reform and integrate into the multilateral trading system, China carried out trade liberalization reform with cutting tariffs and non-tariff barriers as the central task since the early1990s. After successful accession to the WTO by the end of2001, China faithfully fulfilled its WTO commitments and promoted trade liberalization in a planned and step-by-step manner. China’s entry into the WTO has been ten years, and what are the effects of trade liberalization on Chinese manufacturing firms during this period? In the framework of heterogeneous firm trade theory and with the historical event of China’s accession to the WTO as the background, this dissertation tries to comprehensively and systematically investigate the relationship between trade liberalization and firm dynamics, which can reveal the micro effects of trade liberalization on Chinese manufacturing firms.Based on heterogeneous firm trade theory and China’s reality, this dissertation respectively selects firm productivity, firm entry-exit behavior(or firm turnover), firm export dynamics, firm growth and firm size distribution the four dimensions as research perspectives. Unlike the most literatures, this dissertation not only calculates output tariff rates by using highly disaggregated products import tariff data, but also further calculates input tariff rates based on China input-output table. Consequently, we can differentiate the competition effect, the cost saving and diversified quality effect of trade liberalization on manufacturing firms.This dissertation is made up of eight chapters. Chapter1is introduction, which states the background, purposes and significances of the topic, research ideas and methods, as well as the innovation points of the text. Chapter2is the literature review, which briefly reviews and combs the relevant important literatures about international trade, trade liberalization and firms. Chapter3is the policy review and quantitative analysis of China’s trade liberalization process, it firstly overviews China’s trade liberalization process from the trade policy perspective, then introduces the measuring method of trade liberalization, and finally analyzes the calculating results. The4th chapter to the7th chapter are the core parts of this dissertation. In chapter4, we investigate the effects of trade liberalization from the perspective of firm productivity. Firstly, we analyze the mechanisms of trade liberalization on firm productivity, and then conduct an empirical study by using Chinese industrial firm-level micro data from1998to2007. In chapter5, we investigate the effects of trade liberalization from the perspective of firm turnover. Firstly, we develop a dynamic discrete-choice model of firm entry and exit decision to explore the causal link between trade liberalization and firm entry-exit behavior, and put forward some theoretical hypotheses, then we conduct an empirical study by using Chinese industrial firm-level micro data from1998to2007, and finally we make an extended analysis about the relationship between trade liberalization, firm turnover and productivity. In chapter6, we investigate the effects of trade liberalization from the perspective of firm export dynamics. Firstly, we explore the causal link between trade liberalization and firm export, and put forward the corresponding theoretical hypotheses, then we conduct a deep empirical study by using Probit model and the method of survival analysis, and finally we further investigate the relationship between trade liberalization, firm export dynamics and productivity growth. In chapter7, we investigate the effects of trade liberalization from the perspective of firm growth and firm size distribution. Firstly, we depict the stylized facts and put forward some hypothesis, and then conduct an empirical study by using Chinese industrial firm-level micro data from1998to2007. Chapter8summarizes this dissertation, which consists of the main conclusions, policy implications and the further research directions.After theoretical and empirical analysis, the major results can be concluded as follows:(1) Trade liberalization has significantly promoted Chinese manufacturing firms’ productivity, in the regard of increasing manufacturing firms’ productivity, input tariff reduction is larger than output tariff reduction, and the former is the most important reason for promoting firms’ productivity. Manufacturing industrial aggregate productivity gains is mainly coming from the within-firm productivity improvement, while the role of market-share reallocation effect is relatively smaller. Furthermore, we find that trade liberalization has a weak net impact on reallocating efficiency, and it influences aggregate productivity mainly through promoting within-firm productivity.(2) On the effect of firm turnover, there is a significant difference between output tariff reduction and input tariff reduction, while trade liberalization increases firm entry and firm exit on the whole. Firm turnover is an important way for the growth of Chinese manufacturing productivity, and which is also the one of the effective approaches for trade liberalization to increase industrial aggregate productivity.(3) Trade liberalization not only significantly facilitates firms’ export decision, but also raises the export intensity of exporting firms, and the impact of the latter is more important than the former, which indicates that trade liberalization mainly through the way of intensive margin to affect China’s export growth. There is no effect of output tariff reduction on firms dynamics, while input tariff reduction significantly decreases the probability of firms’ export exit, reduces the time for firms to get into export market and helps firms to survive in the export market longer. Finally, firms’ export dynamics contributes significantly to manufacturing TFP growth, at the same time, trade liberalization especially the input tariff reduction has a good explanatory power for this.(4) There is no effect of output tariff reduction on firm growth, while input tariff reduction significantly promotes firm growth, and trade liberalization helps to promote firm growth as a whole. Trade liberalization significantly raises the Pareto exponent of firm size distribution, it helps to make the firm size distribution become more uniform and therefore alleviates the degree of deviation from Zipfs distribution. There exists some asymmetric impacts of trade liberalization on different size group firms’ growth and productivity gains.