Effect Of Quality Of Imported Intermediate Product On Firms' Markups

At present,the export environment of China is deteriorating.Under the background of"favorable entry and excellent output",the import problem has been widely valued in academic circles.In addition,the proportion of intermediate goods in imports is more than 70%.With the improvement of international trade environment,the quality of imported intermediate products has been improved.As China's processing trade occupies a dominant position for a long time,the enterprise is at the bottom of the global value chain,and the enterprise's profitability is weak.In other words,the firms'markup is low.However,there are few literatures on the effect of the quality of imported intermediate goods on firms'markups.Thus,this paper makes a thorough study from the theoretical and empirical perspectives.First,using the Antoniades?2015?^[1]theoretical model,the quality of imported intermediate goods and firms'markups are incorporated into the extended MO model theory framework.The influence of the quality of imported intermediate goods on firms'markups is analyzed from the two sides of consumer and producer behavior,and the research hypothesis of the import intermediate goods is put forward:The increase in firms'markups can be promoted by the increase of quality of imported intermediate goods.In addition,through mechanism analysis,we find that compensation channels and technology transfer channels are two possible ways of influence.Then,based on the matched data of Chinese industrial companies and highly refined customs imports from 2000 to 2006,the paper uses the firms'markups calculation method of De Loecker and Warzynski?2012?^[2],then uses the fixed effect panel model as a whole,and apply four regression methods of 2SLS,LIML,GMM and iGMM to test the stability of the regression result.Through the empirical research on the profitability of firms of imported intermediate goods thoroughly from the perspective of the quality of imported intermediate products,the results of the study indicate that:?1?In general,the quality of imported intermediates product significantly increases firms'markups.The effect of the general trading company is even more significant.Processing trade enterprises'markups have also been raised due to the increase of quality of imported intermediate product.At the same time,effect of the quality of imported intermediate goods is greater for foreign-funded enterprises than for private enterprises,but negative for state-owned enterprises;?2?Impact on the firm's markups from quality of imported intermediate is also different in the industry and region.High-tech companies and enterprises in the eastern region benefit the most from their R&D capabilities and regional advantages respectively;?3?The relation between quality of imported intermediate goods and firms'markups is unidirectional,that is,there is no reverse causality between them;?4?The quality of imported intermediate goods affects firms'markups mainly through the productivity mechanism.In a word,through using the matching data of Chinese Industrial Enterprises and Customs Import Trade,this paper proves that the quality of imported intermediate goods does play a role in promoting the firms'markups.Secondly,this paper enriches the research literature on the quality of imported intermediate goods and firms'markups,provides good policy recommendations for Chinese enterprises to further improve their own profitability,and offers scientific basis for the government to further improve the import trade environment,promote trade transformation and upgrade,adjust the industrial structure,and increase government subsidies and research support.