Multiproduct Firms, Export Product Scope, and Trade Liberalization: The Role of Managerial Efficiency[1]
Larry Qiu[2] Miaojie Yu[3]
No. E2013006 December25, 2013
Abstract: This paper provides a theoretical and empirical analysis of the effects of one-sided tariff cuts on firms' export product scope. The theoretical model explicitly incorporates cost of management in addition to the commonly used production cost. Firms are heterogeneous in terms of managerial efficiency but homogenous in terms of production productivity. The analysis predicts that the home country's tariff cut reduces all home firms' export product scope, whereas in response to the foreign country's tariff cut, a home firm's export product scope expands (shrinks) if the firm's management cost is low (high). These predictions are supported by our empirical analysis based on data on Chinese firms from 2000 to 2006.
JEL: F12, F13, F15
Keywords: Multiproduct firm; Management cost; Managerial efficiency; Export product scope; Trade liberalization
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[1]Acknowledgements: We thank Sai Ding, Amber Li, Yi Lu, and Zhihong Yu for their very helpful comments and suggestions. We benefit from presentation at the 2013 Annual Conference of China Trade Research Group, the International Workship on Trade and Productivity at the University of Glasgow, 2013 Asia Pacific Trade Seminars, Hong Kong Institute of Monetary Research, Hong Kong University of Science and Technology, and Midwest International Economics Meeting (Fall 2013). Larry Qiu thanks Hong Kong Institute of Monetary Research for a financial support and hosting his visit during the last stage of this project. We thank Mohan Zhou for his valuable research assistance. However, all errors in this manuscript are ours.
[2]Faculty of Business and Economics, the University of Hong Kong, Hong Kong, Tel: (852)28591043, Email: larryqiu@hku.hk.
[3] China Center for Economic Research (CCER), National School of Development, Peking University, Beijing 100871, China, Tel: (86)10-62753109, E-mail: mjyu@ccer.pku.edu.cn.
