Essays on Chinese Firm Performance in International Trade
Open AccessThis dissertation consists of three essays covering different topics of international trade. The first one studies Chinese firms' pricing behavior under uncertainty. I develop a monopolistic competition model of trade with firm heterogeneity and endogenous mark-ups. Removing the assumption that demand uncertainty at the export markets is resolved at the time when the output and export decisions are made, a monopolistic competition model of trade with firm heterogeneity and risk-aversion suggests that uncertainty could be a driver of export prices at economic downturns. The model shows that exporters raise mark-ups, thus prices, in response to rising economic volatility in export markets. I then examine the hypotheses and investigate the impact of uncertainty on export prices using a panel dataset of Chinese firm exports from 2000 to 2010 and novel time-variant measures of market-specific uncertainty based on Bloomberg stock volatility. The empirical findings are broadly consistent with the theoretical predictions.The second paper investigates Chinese manufacturing firms' responses to real exchange rate movements using detailed Chinese firm-level data. I design an empirical model to capture the real exchange rate variation of the Chinese yuan (CNY) due to nominal exchange rate movements and study its impact on Chinese firms' performance. The empirical results show a sharp appreciation of the CNY after China's transition to a more market-oriented exchange rate regime could slow down Chinese firms' export and employment growth. However, we find no evidence to support a real exchange rate's impact on total factor productivity or revenue.The third paper (with Ahsan Tariq Butt) examines the behavior of exporters when they encounter a negative shock from their respective trading partner and study the firm-level effects of Antidumping (AD) on the Chinese exporters. Despite China's entry into the World Trade Organization (WTO), non-tariff barriers such as anti-dumping, are still hurdles on Chinese exporters' path to global trade. Using detailed Chinese firm-level data and Global antidumping database, we find evidence that antidumping (AD) investigations, with positive final AD decision, hurt Chinese exporters' total productivity growth. Our analysis suggests that these detrimental impact on firm’s productivity growth are driven by plummeting firm’s export growth in the face of AD, regardless of the final AD outcome, sharply slowing export growth of non-target products and discouraging the exporter to enter the AD-initiating market.
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