Essays in international trade and Chinese economy

Abstract

The first chapter of the thesis studies the distinct effects of importing capital and intermediate inputs on firm productivity. Using a large dataset of Chinese manufacturing firms, we demonstrate that although accounting for only one-sixth of the total input imports, capital imports contribute more than 50% of the productivity gains from international sourcing. While both types of imports exert immediate effects on productivity, capital imports also have dynamic productivity effect and induce more R&D investment. We find that 25% of the productivity gains from capital imports are due to the dynamic productivity and R&D-inducing effects. The findings of this paper bear clear implications for the structure of tariff liberalizations. The second chapter of the thesis investigates how land institution affects economic growth. I propose a simple model showing that, in an institution that land is owned and supplied by the state, local governments tend to increase investment in infrastructure when holding a larger share of land conveyance revenue in the total revenue. The main channel is that land conveyance revenue serves as a signal of credit quality of local governments. To test the model of land financing, I employ an exogenous event of the deregulation of local government debt in China in 2009. Using county-level data in China, empirical results suggest that counties with a higher initial share of land conveyance revenue were growing faster after 2009. The land-financing effect was persistent and even stronger during 2009 to 2014. Results are robust using geographic plainness as the instrumental variable measuring the amount of developable land resources. There is also consistent evidence on the growth of night light intensity.