This award funds empirical research on international trade and competition between manufacturing firms. The PIs will combine two existing data sources to create a dataset with data on Chinese manufacturing firms from 2000 - 2006. The data will include information on ownership type, production, financial/balance sheet results, value of import/export transactions and quantity of import/export transactions. The data set will be used to do two different things. First they will study the relationship between firm productivity, investments, and export sales and prices across a range of 'destination' (eg, non-Chinese) markets. Second, the PIs will use the data to estimate a structural model of firm demand, pricing and export supply. To do this, they will develop a modeling framework that incorporates both demand side and production side firm level heterogeneity. Third, they will estimate a dynamic structural model of firm investment in R&D and capital to study the importance of quality upgrades and productivity improvement as sources of Chinese success in export markets. Finally, they will use the full model to study the effect of possible changes in market conditions such as trade liberalization on exports, investments, and firm performance.
Broader impacts include new insight for economic policy by understanding the causes that make some manufacturing firms successful exporters.