Kee, Hiau Looi and Tang, Heiwai: Domestic Value Added in Exports: Theory and Firm Evidence from China 。American Economic Review, forthcoming, Nov 2015
Domestic Value Added in Exports: Theory and Firm Evidence from China
World Bank - Development Research Group (DECRG)
Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS); CESIfo
November 13, 2015
World Bank Policy Research Working Paper No. 7491
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 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.
Number of Pages in PDF File: 83
Key Words: Firm heterogeneity, Domestic value added, Value added trade, China,
Global value chains, Trade liberalization, FDI liberalization
JEL Classi
cation Numbers: F10, F14