The Export Quality Selection Effect Induced By The Cost Of Customs Clearance

Since the policy of Reform and Opening,China has actively integrated into the international division of labor.Benefiting from the advantages of cheap labor and the growth of the manufacturing industry,China' s import and export trade has grown rapidly.Though China has become a major trading nation,it still has a long way to go before it becomes a trading power,reflecting not only in the export structure and export appreciation rate,but also in the quality of export commodities.Research shows that during the period from 1998 to 2011,the average quality of China's export commodities has fallen by nearly 16%,and the rankings in more than 200 countries and regions have dropped by 94 places.Therefore,improving the quality of export commodities is crucial for China to become a trading power.This paper investigates the impact of customs clearance costs on firm-level export quality.We extend Melitz(2003)by incorporating product quality heterogeneity and use this framework to uncover the mechanism through which customs clearance costs affect firm-level export quality.We test our model using data from Chinese customs and World bank business environment survey.Results show that customs clearance costs measured by clearance days,paper works,and costs have positive impact on export price and quality.Furthermore,our simulation indicates that an increase in customs clearance costs could lower resource reallocations.This study has importance policy implications in how to increase firm-level export quality and improve firms' international competence.