The Effect Analysis Of The Import Extensive Margin On The Diversity Of Domestic Products

China has been pursuing export-oriented development strategy for a long time. On one hand, such a development strategy has promoted the prosperity of China’s economy largely, especially the export trade. On the other hand, import has been in a subordinate status and we ignore its influence on domestic economy, in particular the influence of extensive margin of import.In order to study the impact of import extensive on China’s domestic product varieties, we measured the diversity of domestic product variety using the modified index of Feenstra’s measurement of product diversity, with the data of export. We deduced the regression model with the import extensive margin and the diversity of domestic product variety in it, basing A-V model. Then we add the control variables of the industrial scale and the National Development to the regression model. The study sample includes twenty countries who have close contacts with our country, during the period of 1996-2010.We obtain the product data of HS1996 six level code from UN comrade database. Analysis the panel date using Eviews6.0.The major findings and contributions of this paper are:(1) This article reveals and refine the mechanism of import extensive margin on the domestic product varieties, and expand the theoretical model of Adina and Volodymyr (2009). We explored the relationship between domestic product varieties and import extensive from the angle of import of intermediate and final goods. By expanding the theoretical model of Adina and Volodymyr (2009), we obtained the quantitative relationship between import extensive and domestic product varieties.(2) We amended Feenstra’s method of measuring product varieties, which was then used to measure China’s domestic product varieties. Feenstra’s method of Chain analysis cannot reflect the condition in which the new products don’t change that much. So we choose a base of comparison, which then can perform better than the origin method. Then we measured the domestic product diversity using the modified measurement with export data.(3) We study the impact of import extensive on China’s domestic product diversity from different aspects. In the case of the extensive type, the role of geography extensive is greater than that of product geography, which even has inhibition in some industries. In the case of the extensive source.According to the above conclusions, we offer the following policy recommendations:Expand the extensive margin of import and enhance the level of diversity of domestic product variety; Pay attention to not only the introduction of the importation of high-tech products, but also the independent innovation.