Firm R&D, Processing Trade and Input Trade Liberalisation: Evidence from Chinese Firms

This paper examines the impact of input trade liberalisation on firm R&D activity by taking China's accession to the WTO as a quasi‐natural experiment. Different from ordinary imports, processing imports in China enjoy zero tariffs and are not affected by input trade liberalisation due to t...

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Bibliographic Details
Published inWorld economy Vol. 40; no. 2; pp. 297 - 313
Main Authors Tian, Wei, Yu, Miaojie
Format Journal Article
LanguageEnglish
Published 01.02.2017
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Summary:This paper examines the impact of input trade liberalisation on firm R&D activity by taking China's accession to the WTO as a quasi‐natural experiment. Different from ordinary imports, processing imports in China enjoy zero tariffs and are not affected by input trade liberalisation due to the WTO accession. The paper uses disaggregated firm‐level production data and transaction‐level trade data to perform difference‐in‐difference analysis by taking processing import firms as a control group. An intensive empirical search shows that after China's accession to the WTO, input trade liberalisation fostered firm R&D significantly. The findings are robust to different measures and various empirical specifications.
ISSN:0378-5920
1467-9701
DOI:10.1111/twec.12367