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Heterogeneous effects of trade liberalisation on firm-level markups: Evidence from China
- Source :
- The World Economy. 40:1667-1686
- Publication Year :
- 2017
- Publisher :
- Wiley, 2017.
-
Abstract
- This paper analyses how trade liberalisation affects the markups of Chinese firms based on firm-level production data, highly disaggregated transaction-level product trade data and tariff data at the eight-digit Harmonised System (HS) level. Our results show that there is a pro-competition effect of output tariff reduction, that is decreasing output tariffs relate to a lower markup, and that there is a cost-reduction effect of input tariff reduction, that is decreasing input tariffs relate to a higher markup. Interestingly, there are heterogeneous effects of trade liberalisation on firm-level markups. The cost-reduction effect of input tariff reduction is partially offset by the competition effect of new firm entry in more-concentrated industries. Furthermore, there is a weaker effect of trade liberalisation on processing trade firms and state-owned enterprises. Finally, our results are robust to the use of an instrumental variable approach to control for the endogeneity of tariffs and sample selection.
- Subjects :
- Sample selection
Economics and Econometrics
Liberalization
05 social sciences
Instrumental variable
Tariff reduction
Tariff
ComputerApplications_COMPUTERSINOTHERSYSTEMS
Monetary economics
Microeconomics
Accounting
0502 economics and business
Political Science and International Relations
Economics
Endogeneity
050207 economics
China
Finance
050205 econometrics
Subjects
Details
- ISSN :
- 03785920
- Volume :
- 40
- Database :
- OpenAIRE
- Journal :
- The World Economy
- Accession number :
- edsair.doi...........7354304629544561a8f89192e6e8a820