Working Paper: NBER ID: w17524
Authors: Amit K. Khandelwal; Peter K. Schott; Shangjin Wei
Abstract: 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.
Keywords: Trade Liberalization; Institutional Reform; Productivity; Chinese Exporters
JEL Codes: F10; F13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| removal of export quotas (F10) | surge in export value (F10) |
| removal of export quotas (F10) | decline in export prices (F14) |
| net entry of firms into the export market (F23) | surge in export value (F10) |
| misallocation of quotas (F16) | suppression of productivity (O49) |
| removal of export quotas (F10) | productivity gain (O49) |
| elimination of misallocated quotas (F16) | productivity gain (O49) |
| entrants (M13) | decline in relative prices (E31) |
| incumbents with highest market shares under quotas (D45) | largest declines in market share post-removal (L17) |