Trade Liberalization, Competition and Industry' Upgrading——A New Explanation of Mystery of Export Structure in China
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| Title | Trade Liberalization, Competition and Industry' Upgrading——A New Explanation of Mystery of Export Structure in China
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| Author | Jian Ze, Wang Zili, Yao Luo and Lyu Daguo |
| Organization | Institute of Industrial Economics of JXUFE; Department of Economics of University of Toronto; School of Economics of Nanjing University |
| Email | jianze@tongji.edu.cn；13077958258@126.com；yao.luo@utoronto.ca；peterlv1979@126.com |
| Key Words | Trade Liberalization; External Competition Shocks; Upgrading of Export Structure |
| Abstract | In this article, we examine the impact of trade liberalization on the production and export structure of China's industrial sector. In a framework that integrates comparative advantage and heterogeneous firms, utilizing a natural experiment provided by China's entry into WTO, we obtain the following results: (1) Compared with the labor-intensive industries with comparative advantage, trade liberalization has brought a strong external competitive shock to those capital intensive-industries which are at a disadvantage; (2) Based on productivity, this external competitive shock has inspired the "creative destruction" within capital-intensive industries, through which firms turnover and the industries restructure. Thus the structure within industries upgrades and efficiency improves; (3) The upgrading of the structure within capital-intensive industries not only promotes the growth of production, but also facilitates export along the extensive margin. Thus the changes in the structure within capital-intensive industries drives the upgrading of the structure among industries. These results show that a novel force emerge in a perspective that integrates comparative advantage and heterogeneous firms. As a result of this force, contrary to the standard theory, trade liberalization does not enlarge the role of comparative advantage, but to a greater extent promote the growth of export of comparative disadvantage industries, and thus promote the upgrading of industrial structure. |
| Serial Number | WP1136 |
| Time | 2016-11-29 |
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