A Study Of Export Product Heterogeneity On Export Duration Of Firms

Export stabilization is of vital importance for the stable growth of China's economy. China is the world's largest trader in goods and export is inevitably influenced by fluctuations in the world economy. With China's export boom, China's exports has revealed the characteristics of hazard and vulnerability. Promoting the established trade relationship's sustainability and prolonging export duration is important for guaranteeing export stability. A country's export performance is formed by the behavior of export firms. Therefore, prolonging firms'export duration is the key for China's export stabilization. Multi-product export firm is the main form of China's exports. Studying the export dynamics of heterogeneous products within-firms in an analysis framework of trade model of multi-product heterogeneous firms is often neglected. In special, there is a lack of insight on micro-level about the impact of export product heterogeneity on export duration of firms; and analysis of resource reallocation effect across heterogeneous products within-firms and its impact on firm behaviour. Traditional international trade theory illustrates resource reallocation and survival of the fittest across industries. Heterogeneous-firms trade theory based on single-product firm assumption explains how resource is reallocated across firms within-industries. In a further step, multi-product heterogeneous firm model which is one of the latest research direction of New-New trade theory reveals the reallocation process across heterogeneous products within-firms. Different from developed countries, many developing countries integrate into the global value chain through processing trade. Especially, processing trade is one important driving force of China's export growth. Moreover, the performance and behavior of exporters engaged in processing trade are different from firms engaged in ordinary trade. As such, this research explores the impact of export product heterogeneity on export duration of firms and this research is conducted by introducing trade regime of export in order to take into account of the economic characteristics of many developing countries including China.Under a theoretical framework of multi-product heterogeneous firm's trade model in New-New Trade Theory, this research explores the impact and logic chain of export product heterogeneity on firms'export duration which is often neglected by researchers in international trade area. In specific, this paper describes and depicts three micro-impact channels on firms'export duration including export product scope, export product switching and export product intensity, under the perspective of export product heterogeneity and under a multi-product heterogeneous firm's trade model in a monopoly competition market. Expending export product scope is beneficial for firms to decrease the market exit hazards and prolong firms'export duration. Firms who switch their export product varieties have longer export duration. This suggests the positive impact of resource reallocation effect which is characterized by adding new products and dropping old products on firms'export survival. Firms will change export product intensity to cope with external shocks; however, the impact direction of export product intensity on firms'export duration is uncertain from the perspective of the whole market.There are differences between firms in developing countries and firms in developed countries because of the differences in economic development period. Specially, processing trade is an important trade regime for many developing countries participating in export market and the behavior of firms engaged in processing trade is different from that of firms engaged in ordinary trade. However, there is a lack of attention and consideration of analysis of differences in firms'behavior between that in developing countries and in developed countries among existing studies of New-New trade theory. Therefore, this research introduces the factor that characterizes firms'export trade regime in both theoretical and empirical study. As such, the conclusions can be closer to the economic reality of many developing countries including China.Based on firm-level data from China, this research recognizes the characteristics of Chinese firms'export product heterogeneity from three perspectives including export product scope, export product switching and export product intensity. Chinese firms'export product heterogeneity is observed and explored in this research and this helps enrich the studies of heterogeneous products dynamics within-Chinese firms under the framework of multi-product firms. The research demonstrates that multi-product firm is the main type of Chinese export firms. Chinese firms switch export product varieties frequently and resource reallocation effects exists. With the increase of export product variety, firms'average export product intensity presents a downward trend. The analysis shows that Chinese exporters engaged only in processing trade have narrower export product scope and switch export product varieties less frequently than exporters engaged only in ordinary trade and partly in processing trade. Moreover, this research depicts and compares the distribution of export duration of Chinese firms who present differences in export product heterogeneity, employing Kaplan-Meier methodology.At last, this research employs discrete time cloglog survival analysis model to estimate the impact of export product heterogeneity on firms'export duration. This research employs Propensity Score Matching method to cope with data selection bias and endogeneity problems. In addition, this research constructs and introduces weight index based on merged database to cope with data migration issues. The estimations based on matched database suggest that extending export product scope is beneficial for Chinese firms to increase export duration and export duration of middle-scope exporters is longer. Export product switching is beneficial for Chinese firms to prolong export duration. Net adding and churning of export product activities decrease firms'exit hazards significantly, suggesting the positive impact of resource reallocation effect within-firms on firm survival in export market. Relatively, firms who have high-intensity of export product have longer export duration, but this positive effect works after 2 years firms entering the export market. Furthermore, this research employs discrete-time cloglog model to explore the impact of export product heterogeneity on export duration of firms engaged in different trade modes, after compares the performance and behavior of firms engaged in different trade modes employing kernel density estimation, boxplots estimation and Generalized Propensity Score Matching method. Estimations demonstrate that there is limited effect of export product switching and export product intensity on export duration of Chinese firms engaged only in processing trade. This paper provides new insight into the way to increase firms'export duration and promote the stability of countries'export development through both theoretical and empirical analysis. Additionally, this research emphasizes the urgent requests for Chinese firms engaged in processing trade to increase autonomy of export product decision and promote the'excellent in and excellent out' strategy. This research also reflects the importance of transformation and upgrading of China's processing trade. These are all critical issues for China who is a large trading country transforming to a strong trading power.