Seminar（Dept. of Trade Economics）

Theme：Domestic Demand, Exports and Trade Organization: Evidence from Chinese Exporters

Speaker：Yaqi Wang (School of Finance, Central University of Finance and Economics)

Time：2021-12-15 16:00

Address：Room 706, Mingde Business Building

Language：Chinese/English

Abstract：

This paper investigates how changes in the size of domestic demand have a differential impact on a firm's exports under different trade regimes. Based on a theoretical framework featured by firm heterogeneity and endogenous output quality choice, this paper points out that the magnitude of the net effect of domestic demand size change on firms' exports depends mainly on firms' quality improvement efficiency and scale economies. Based on the theoretical model, we find that: i). an increase in the size of domestic demand leads to a larger increase in the export value of ordinary trade exporters relative to processing trade exporters; ii). an increase in the size of domestic demand leads to a rise in the share of ordinary trade exports at the firm level. We build an empirical model to confirm these theoretical inferences based on micro-level Chinese customs transaction export data and an annual survey of industrial firms' databases. The benchmark results of this paper hold under a series of robustness tests.