The Rise Of Factor Price And Upgrade Of Export Ouality

The instability of foreign trade growth after international financial crisis indicates that the correct strategy of maintaining sustainable export growth should rely on export quality upgrade rather than low-price advantage. On the other hand, the factor market reform is being accelerated, resulting rising tendency for all kinds of factors which tends to leave a certain impact export quality in country as well as industry level through influencing the production decision for firms.This thesis first present the calculated quality index for manufacture in the country and province level as well as the price rising situation of factors including labor, capital and resource products in recent years. Then combining D-S Model and Quality Ladder Model of Grossman&Helpman(1991), we try to deduce the process that the rising factor prices affect the probability of quality upgrade for a country through the factor input of final production department and R&D department, and find the different directions and mechanism of effects from three factors to the upgrade of export quality. The empirical analysis conducts the regression in the level of country and regions based on data of28provinces from2002to2008, implying the group effect, dynamic characteristic and regional progressive effects from rising factor price on export quality. Finally this thesis throws out some policy suggestions for China on how to better coordinate the processes of domestic factor pricing reform and new advantage cultivating in international trade from different perspectives. The main conclusions can be drawn:Theoretical analysis indicates that in the closed economy, rise in price of labor and material would force labor transfer from production department to R&D department and urge enterprises to upgrade quality of their products. However, the material price only affect the production department rather than the R&D department. Rise in price of capital will restrain quality upgrade due to the rising cost of quality upgrade. In the open economy, rise in price of labor and material still help the quality upgrade, while the material price will also affect the production decision of single R&D department due to the existence of trade cost. Rise in price of capital will still restrain quality upgrade.Empirical analysis indicates that in the country level, the rise in labor and material price helped to export quality upgrade, which could be theoretically explained by mechanism that rise in price of these two factors would trigger labor transfer from production department to R&D department and urge enterprises to upgrade quality of their products. However, the effect from material price was not significant, which might be interpreted by relatively high degree of distortions in material price in China. Rise in price of capital could restrain the upgrade of export quality in manufacture. From the dynamic analysis, the promoting effect of labor and material price to export quality gradually weakened and strengthened respectively, while the inhibiting effect of rise in capital price weakened as time went by. In the regional level, the promoting effect of labor price to export quality tended to be insignificant from east to west, which could be explained by regional difference in the level and speed of labor price. The regressive results of capital and material factors were similar with that of country level.