Research On The Effect Of Factor Market Distortion On Trade In Value Added

Global value chain has become a distinctive feature of the international division of labor.It is of great theoretical significance to re-examine the binary margin of value-added trade from the perspective of global value chain.At the same time,the trade gains of firms who take part in value-added trade have not increased correspondingly with the expansion of export scale.The reason is that these exporters loss efficiency gradually from low-cost advantages,which is provided by negative factor market distortion.Therefore,it is of great theoretical significance to take in-depth study of the impact of factor market distortion on the binary margin of value-added trade;and explore the method to correction of this kind of efficiency loss from negative factor market distortion.First of all,we review literature at home and abroad on factor market distortion and trade in value added,and discuss the mechanism of the effect of factor market distortion on the binary margin of trade in value added.Specifically,the factor market distortion will have active effect on the expansive margin of trade in value added through the improvement of cost,the transfer of competition,and the insufficient domestic demand.Besides,the factor market distortion will have negative effect on intensive margin of trade in value added through human capital effects,financial constraints,and R&D suppression effects,except the active effect on the intensive margin of trade in value added provide by the improvement of cost.Secondly,we conducted a comprehensive measure of trade in value added by firms and the degree of factor market distortion of 40 industrial sectors from 2000 to 2006.Then,we apply the Heckman two-stage model to verify the effect of factor market distortion on binary margin of trade in value added of Chinese firms.Finally,we also conduct robustness tests based on regional differences and extended analysis based on contract intensity of industrial sectors.The empirical analysis results show that:(1)For the manufacturing enterprises,the factor market distortion will promote the extensive margin of trade in value added,but the linkage effect of TFP will have an negative effect on the intensive margin of trade in value added.(2)The extensive margins and intensive margins of the value-added trade of firms in the eastern region are more vulnerable than those in the central and western regions to factor market distortions and the linkages between factor market distortion and TFP.(3)Factor market distortion has positive effect on the expansive margin of trade in value added of industries with low contract intensities while has no effect on the industries with high contract intensities.Besides,the combined effect of factor market distortion and TFP on the binary margin of trade in value added of firms remains significant.Based on the above conclusions,we finally put forward suggestions,including correcting factor market distortions gradually,guiding firms to moving up actively in the global value chain.