ABSTRACT
Trade liberalization is one of the most important topics in international trade. This chapter investigates the effects of changing input trade costs on firms’ export intensity using a very rich matched Chinese firm-level production data and transaction-level trade data. It explores how reductions in input trade costs affect firms’ export intensity by exploiting the special tariff treatment afforded to the imported inputs by processing firms as opposed to non-processing firms in China. Trade liberalization is not only able to boost firm productivity via generating tougher import competition. The chapter introduces the measures for key variables and empirical specifications and discusses the estimation results and sensitivity analysis. The average Ad Valorem duties are used to measure trade liberalization to estimate the effect of trade liberalization on export intensity. The disaggregated transaction-level monthly trade data during 2000–2006 are obtained from China’s General Administration of Customs.
