Dr. Angdi Lu recently had a paper published in the China Economic Review. The paper titled‘Imports of key capital goods and quality upgrading: Evidence from China’s import subsidy policy’, was coauthored with Jie Li from International School of Economics and Management, Capital University of Economics and Business, and Shuang Wu from Institute of New Structural Economics, Peking University.

Abstract

This paper examines the impact of capital goods imports on firms’ export quality upgrading with a subsidy policy for advanced capital imports implemented in China since 2008. Using a matched dataset of firms’ production and custom data, we employ a difference-in-differences strategy that exploits firms’ differential pre-event exposures to the policy. We find that the subsidy policy increases firms’ imports of subsidized products, and improves their export quality. Furthermore, export quality improvements due to capital goods imports are larger if (1) firms are more productive; (2) the exporting product is the firm’s core product; (3) the product is a differentiated good; and (4) the destination market is larger and richer. Further analysis suggests that capital goods imports can also boost firms’ total exports and the number of exporting destinations and products. The mechanism tests reveal that capital-skill complementarity can explain improved export product quality through capital goods imports. Capital goods imports also lead to increased skill management that can improve export quality as well.

Other information

Publication Date:2023

Journal:China Economic Review

DOI:https://doi.org/10.1016/j.chieco.2023.101988

Read the paper here.