Domestic Value Added in Exports: Theory and Firm Evidence from China

By H. Kee, Heiwai Tang. Social Science Research Network, 2015

526 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/c8d9a146aefd06b77422ad0f1c26251a7dd989c4

Citations in the corpus

• On the Relationship between Quality and Productivity: Evidence from China's Accession to the WTO (2017, unknown): “This is also reflected in the steady share of processing exports in total exports over time that is around 55% (Kee and Tang, 2016).”
• How Firms Export: Processing vs. Ordinary Trade with Financial Frictions (2016, unknown): “…has been the inference of domestic value added and production line position from trade flows and input–output tables at the country level (Johnson and Noguera, 2012; Antràs and Chor, 2013; Fally, 2011) and in China in particular (Brandt and Morrow, 2015; Kee and Tang, 2012; Koopman et al., 2011).”
• Importers, exporters, and exchange rate disconnect (2014, unknown): “Goldberg and Verboven (2001) apply this methodology in the context of the European car market, while Nakamura and Zerom (2010) and Goldberg and Hellerstein (2013) study the coffee and the beer markets, respectively, incorporating sticky prices into the analysis.”
• An Anatomy of the Global Trade Slowdown based on the WIOD 2016 Release (2016, unknown): “10 See Koopman et al. (2014) and Los et al. (2016) for extensions of the VS approach.”
• Do Global Value Chains Enhance Economic Upgrading? A Long View (2020, unknown): “China and Thailand, for example, have both successfully developed through GVC participation (Kee & Tang, 2016; Wad, 2009).”
• China's “Great Migration”: The impact of the reduction in trade policy uncertainty (2019, unknown): “The recent analysis by McCaig (2011) of poverty and internal migration in Vietnam represents an exception, as the source of the shock is an exogenous trade policy change implemented by an important trading partner, the U.S. (the 2001 extension of MFN treatment to Vietnamese imports). McCaig (2011)fi”
• Functional specialisation in trade (2018, unknown): “the 2000s, substituting imports of sophisticated parts and components by local goods whose production arguably requires more R&D and other headquarter activities (Kee and Tang, 2016).”
• Slicing Up Global Value Chains (2014, unknown): “Rather than using Leontief’s insight to analyze the value-added content of trade fl ows, we focus on the value-added content of fi nal demand.”