A Study Of The Effect Of Trade Policy Uncertainty On Markups

Since China joined the WTO at the end of 2001,it has enjoyed the most favored nation treatment(MFN)of member countries.The reason behind the rising economy of China is due to the rapid development of foreign trade.Meanwhile,the trade between the United States and China is also more frequent.In 2015,China became largest trading partner of the United States beyond Canada for the first time.Most of the papers are based on the tariff change of inputs or final products to analyze the impact of the WTO on China.But this paper bases on WTO's Tariff Download Facility database and US import tariff data compiled by Romails,to measure changes in trade policy uncertainty through the tariff between China and the United States after China joined WTO.In addition,based on Chinese customs transaction-level trade data and the Annual Surveys of Industrial Firms from the National Bureau of Statistics(NBS)of China from 2000 to 2006,the product-level markups of multiproduct firms are calculated.Compared with the firm-level markup,this methodology does not require assumptions about the market structure or the firm's demand curve,nor does it need to assume that the firm allocates inputs between products.Then,based on the model with the variables of trade policy uncertainty and firmproduct markup,we add other control variables to examine the relationship between trade policy uncertainty and firm-product markup.Finally,this paper analyzes the heterogeneity impact of trade policy uncertainty on export products under different trade patterns(processing trade and general trade).The main results are as follows: Firstly,the decrease of trade policy uncertainty is positively related to the firm-product markup.The greater the decrease of trade policy uncertainty,the higher the firm-product markup.Secondly,given the decrease degree of the trade policy uncertainty,we find out that compared with small and medium firms,the product-level markup of large firms is more sensitive;compared with private firms,the product-level markup of foreign-owned firms and state-owned firms is more sensitive.Thirdly,No matter on the whole,or under the different firm scales or ownership types,compared with the products under the general trade,the decline of the trade policy uncertainty has greater influence on the product markups under the processing trade.