Working Paper: NBER ID: w17728
Authors: Robert C. Feenstra; Chang Hong; Hong Ma; Barbara J. Spencer
Abstract: Recent research has demonstrated the importance of institutional quality at the country level for both the volume of trade and the ability to trade in differentiated goods that rely on contract enforcement. This paper takes advantage of cross-provincial variation in institutional quality in China, and export data that distinguishes between foreign and domestic exporters and processing versus ordinary trade, to show that institutional quality is a significant factor in determining Chinese provincial export patterns. Institutions matter more for processing trade, and more for foreign firms, just as we would expect from a greater reliance on contracts in these cases.
Keywords: Institutional Quality; Trade Patterns; Processing Trade; Export Processing Zones
JEL Codes: F13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| growth of EPZs since 2001 (F69) | variation in export values (F14) |
| presence of EPZs (R32) | facilitating exports (F10) |
| higher institutional quality (L15) | increased exports (F10) |
| institutional quality (L15) | increased exports of differentiated goods (F14) |
| institutional quality (L15) | increased exports of reference-priced goods (F14) |
| institutional quality (L15) | increased exports in processing trade (F10) |
| institutional quality (L15) | increased exports for foreign firms (F23) |