Factor Intensity, Product Switching, and Productivity: Evidence from Chinese Exporters
This paper analyzes the causal relations between rms productivity, factor intensity and export participation. Using propensity score matching techniques and rm-level panel data for Chinese manufacturing rms over the 1998-2007 period, we nd strong evidence of domestic rms self-selecting into export markets with higher productivity ex ante, and enhanced productivity ex post. No such pattern is observed among foreign-invested rms. We also nd that both domestic and foreign new exporters exploit Chinas low labor costs and specialize in their core competence, that is, rms become less capital-intensive after exporting, relative to the matched non-exporting counterparts in the same industry. To rationalize these results that contrast with most ndings in the existing literature, we develop a variant of the multi-product model of Bernard, Redding, and Schott (2010) to consider varying capital intensity across products. Using transaction-level export data, we find evidence that Chinese exporters add new products that are more labor-intensive than existing products and drop products that are less labor- intensive, supporting the model predictions. Firms with a bigger decline in capital intensity after exporting are found to have a larger increase in measured TFP.