The Research Of Trade Cost And Core Products Of Multi-product Firms

This paper uses newly available detailed customs data on Chinese trade flows from2000to2006, and utilizes the BRS model and Eckel and Neary model to establish existing stylizedfacts about multi-product firms in international trade. Through the empirical work, wedemonstrate the relationship about the trade cost and the core product of multi-product firms,discovering the following seven stylized facts. First, the ever growing trade volume of Chinamainly depends on the intensive margin of trade, mostly from the expansion of existing productsof existing firms; the extensive trade margin, such as the newly entered firms beginning to exportand the increasing of the product varieties, makes a little contribution. Second, exchange rate hasa negative correlation with export; and the short trade cost has a high influence to extensivemargin of trade, while little affect on the intensive margin of trade. Third, in each market, theprofile of sales revenue is uniform. Multi-product firms concentrate to produce and export thecore competence products. Fourth, the core products play a crucial role in the export of firms,and the export of high-tech products are becoming more and more than ever, consequently, thereis the trend to optimize the export structure. On the other hand, however, the traditional and thecompetitive advantaged labor-intensive products, with a characteristic of large firms exportingsmall quantities, still have a high ratio of the China export. Fifth, in China, the products with ahigh export value also have high quantities and the large volume of trade is mainly supported bythe high quantities, so that we can arrive at the conclusion that the growing mode of economy ofChina is extensive one. In general, the fast quantities growing contribute the high value of exportin China; in contrast, the price has very little effect. Sixth, the ranking of varieties by salesrevenue are the same in each market. Seventh, with trade cost and core product uncontrollable,firm should product its core product and it has a large effect on two margin of trade.