Working Paper: NBER ID: w23487
Authors: Mary Amiti; Mi Dai; Robert C. Feenstra; John Romalis
Abstract: We analyze the effects of China’s rapid export expansion following WTO entry on U.S. prices, exploiting cross-industry variation in trade liberalization. Lower input tariffs boosted Chinese firms’ productivity, lowered costs, and, in conjunction with reduced U.S. tariff uncertainty, expanded export participation. We find that China’s WTO entry significantly reduced variety-adjusted U.S. manufacturing price indexes between 2000 and 2006. For the Chinese components of these indexes, one third of the beneficial impact comes from Chinese exporters lowering their prices, while two-thirds of the beneficial impact comes from the entry of new Chinese exporters. China’s WTO entry also led other countries exporting to the U.S. to lower their prices, which was partly offset by exit of these exporters. We find that this impact on competitor countries’ prices is primarily explained by the reduction in China’s own input tariffs, so that policy action becomes the largest source of welfare gain for the United States from China’s WTO entry.
Keywords: China; WTO; US Prices; Trade Liberalization; Consumer Welfare
JEL Codes: F12; F14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| China's entry (F19) | price reductions from other countries exporting to the US (F14) |
| Chinese input tariff reductions (F14) | lower export prices (F14) |
| new Chinese exporters entering the market (F10) | increase variety and lower prices (L11) |