American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Domestic Value Added in Exports: Theory and Firm Evidence from China
American Economic Review
vol. 106,
no. 6, June 2016
(pp. 1402–36)
Abstract
China has defied the declining trend in domestic content in exports in many countries. This paper studies China's rising domestic content in exports using firm- and customs transaction-level data. The approach embraces firm heterogeneity and hence reduces aggregation bias. The study finds that the substitution of domestic for imported materials by individual processing exporters caused China's domestic content in exports to increase from 65 to 70 percent in the period 2000-2007. Such substitution was induced by the country's trade and investment liberalization, which deepened its engagement in global value chains and led to a greater variety of domestic materials becoming available at lower prices.Citation
Kee, Hiau Looi, and Heiwai Tang. 2016. "Domestic Value Added in Exports: Theory and Firm Evidence from China." American Economic Review, 106 (6): 1402–36. DOI: 10.1257/aer.20131687Additional Materials
JEL Classification
- F13 Trade Policy; International Trade Organizations
- F14 Empirical Studies of Trade
- L14 Transactional Relationships; Contracts and Reputation; Networks
- O19 International Linkages to Development; Role of International Organizations
- O24 Development Planning and Policy: Trade Policy; Factor Movement; Foreign Exchange Policy
- P31 Socialist Enterprises and Their Transitions
- P33 Socialist Institutions and Their Transitions: International Trade, Finance, Investment, Relations, and Aid