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Input prices, productivity, and trade dynamics: long‐run effects of liberalization on Chinese paint manufacturers

Input prices, productivity, and trade dynamics: long‐run effects of liberalization on Chinese... We develop a dynamic model to analyze the impact of input tariff liberalization on input prices, trading decisions, and productivity. Although input tariffs directly affect input price benefits of importing, their impact on trade participation generates indirect benefits through productivity improvements and complementarity between importing and exporting. To disentangle these effects, we separately measure importing's effect on input prices and productivity and examine Chinese paint manufacturers' reaction to input tariff liberalization. We find that a mild short‐term effect of tariff liberalization is amplified in the long run by induced trade participation, resulting in even higher productivity and lower input prices. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Rand Journal of Economics Wiley

Input prices, productivity, and trade dynamics: long‐run effects of liberalization on Chinese paint manufacturers

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References (75)

Publisher
Wiley
Copyright
© 2022 The RAND Corporation.
ISSN
0741-6261
eISSN
1756-2171
DOI
10.1111/1756-2171.12420
Publisher site
See Article on Publisher Site

Abstract

We develop a dynamic model to analyze the impact of input tariff liberalization on input prices, trading decisions, and productivity. Although input tariffs directly affect input price benefits of importing, their impact on trade participation generates indirect benefits through productivity improvements and complementarity between importing and exporting. To disentangle these effects, we separately measure importing's effect on input prices and productivity and examine Chinese paint manufacturers' reaction to input tariff liberalization. We find that a mild short‐term effect of tariff liberalization is amplified in the long run by induced trade participation, resulting in even higher productivity and lower input prices.

Journal

The Rand Journal of EconomicsWiley

Published: Sep 1, 2022

Keywords: China; direct importing; dynamics; imported intermediate inputs; productivity

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