Productivity Dynamics and Economic Transition in China

Abstract

This dissertation consists of three chapters investigating topics on international trade and immigration in China. In the first chapter, which is a joint work with Joel Rodrigue, Yong Tan and Chunhai Yu, we studies idiosyncratic productivity and demand among Chinese exporters. Using a multi-destination multi-product monopolistic competition model, we develop firm, product, market and year-specific measures of productivity and demand. We use these measures to document a number of novel findings that distinguish the growth of Chinese exports. We find that idiosyncratic differences (demand or productivity) across heterogeneous firms account for nearly half of total export growth. Our results highlight three mechanisms, which contribute significantly to aggregate demand growth: the strong growth of surviving products with small initial market shares, the rapid reallocation of market shares towards products with growing demand, and high rates of product exit among low-demand products. The second chapter, which is a joint work with Dong Chen, also focuses on Chinese export growth. The paper investigates the time varying effects of internal finance on Chinese firm exporting behavior in the context of WTO accession. The China's WTO accession was an important policy change and abolished regulation on firm export modes over the period 2001-2004 as a fulfillment of the entry commitment. Employing panel data and a difference-in-difference-in-differences estimation approach, we find that improvements in firm-level internal finance had a much larger impact on firms' export volumes when the firm switched from indirect to direct exporting after China's WTO accession. Finally, the third paper analyzes labor migration within China in a real business cycle framework. Emigration to the coastal region of China increases with the expected stream of wage gains from the coast and smaller inland capital distortions. The model explains a large portion of labor immigration across regions every year and shows that removing the capital distortions for inland firms does not necessarily increase the welfare for inland households, unless the immigration cost is low.