Importing and Firm Productivity in China: The Self-Selection Effect or the Learning Effect?

Abstract

This paper uses data on Chinese manufacturing enterprises from 2000 to 2005 to explore the possible causal relationship between importing and firm productivity. By examining firm heterogeneity, we find that importers outperform non-importers on all the major scale and efficiency indicators. With respect to total factor productivity (TFP), importers perform better than firms with no international trade, and bilateral traders perform better than exporters. However, the positive relationship between importing and firm productivity is induced by the learning by importing effect, rather than the self-selection effect. We find no self-selection effect among non-exporters, processing trade exporters, and other exporters, whereas non-exporters and processing trade exporters benefit from importing; processing trade exporters with low TFP in particular benefit from faster TFP growth. No learning by importing effect is found among other exporters.

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