Factor Intensity, product switching, and productivity : Evidence from Chinese exporters

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journal

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Detail(s)

Original languageEnglish
Pages (from-to)349-362
Journal / PublicationJournal of International Economics
Volume92
Issue number2
Online published14 Nov 2013
Publication statusPublished - Mar 2014

Abstract

This paper analyzes how a firm's specialization in its core products after exporting affects its factor intensity and productivity. Using Chinese manufacturing firm data for the 1998-2007 period, we find that firms become less capital-intensive but more productive after exporting, compared to non-exporters that share similar ex ante characteristics. To rationalize these findings that contrast with existing studies, we develop a variant of the model by Bernard, Redding, and Schott (2010, 2011) to consider firms producing multiple products with varying capital intensity. The model predicts that when a firm in a labor-abundant country starts exporting, it specializes in its core competencies by allocating more resources to produce more labor-intensive products. Firm ex ante productivity is associated with a smaller decline in capital intensity after exporting. A sharper post-export decline in capital intensity is associated with a larger increase in measured total factor productivity. We find firm-level evidence supporting these predictions. Using transaction-level data for the 2000-2006 period, we show that Chinese new exporters add products that are less capital-intensive than their existing products and drop those that are more capital-intensive in subsequent years. © 2013 Elsevier B.V.

Research Area(s)

  • Exporters, Factor intensity, Multi-product firms, Productivity