Trade Liberalization and Embedded Institutional Reform: Evidence from Chinese Exporters
If trade barriers are managed by inefficient institutions, trade liberalization can lead to greater-than-expected gains. We examine Chinese textile and clothing exports before and after the elimination of externally imposed export quotas. We find that the surge in export value and decline in export prices following quota removal is driven by net entry, and show that this dominance is inconsistent with use of a productivity-based allocation of quota licenses by the Chinese government. Our counterfactual implies that elimination of misallocated quotas raised the overall productivity gain of quota removal by 28 percent.
We thank JaeBin Ahn, David Atkin, Franciso Buera, Lorenzo Caliendo, A.V. Chari, Arnaud Costinot, Jonathan Dingel, Gene Grossman, Kalina Manova, Thomas Moore, Siddharth Sharma, Nina Pavcnik, Jonathon Vogel, Daniel Xu and seminar participants for helpful comments and suggestions. Di Fu provided excellent research assistance. We acknowledge funding from the Program for Financial Studies at Columbia Business School and the National Science Foundation (SES-0550190). The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Amit K. Khandelwal & Peter K. Schott & Shang-Jin Wei, 2013. "Trade Liberalization and Embedded Institutional Reform: Evidence from Chinese Exporters," American Economic Review, American Economic Association, vol. 103(6), pages 2169-95, October. citation courtesy of