We present the first comprehensive set of firm-level total factor productivity estimates for China's manufacturing sector that spans her entry into WTO. We find that productivity growth is among the highest compared to other countries. For our preferred estimate, the weighted average annual productivity growth for incumbents is 2.7% for a gross output production function and 7.7% for a value added production function over the period [1998][1999][2000][2001][2002][2003][2004][2005][2006]. Of the various sensitivity checks we carry out, controlling for the increase in labor quality and labor hours, as proxied by the rising real wage, has the largest (downward) effect on the productivity estimates. We further document that new entrants are a particularly dynamic force and that firms experience large productivity declines before exiting from the sample. Overall, net entry contributes roughly half to total TFP growth. Aggregate productivity growth, however, is tempered by a much lower effect of reallocation of inputs towards higher productivity firms, compared to the U.S. benchmark.

In this article, we apply global value chain (GVC) analysis to recent trends in the global automotive industry, with special attention paid to the case of North America. We use the three main elements of the GVC framework-firm-level chain governance, power and institutions-to highlight some of the defining characteristics of this important industry. First, national political institutions create pressure for local content, which drives production close to end markets, where it tends to be organized nationally or regionally. Second, in terms of GVC governance, rising product complexity combined with low codifiability and a paucity of industry-level standards has driven buyer-supplier linkages toward the relational form, a governance mode that is more compatible with Japanese than American supplier relations. The outsourcing boom of the 1990s exacerbated this situation. As work shifted to the supply base, lead firms and suppliers were forced to develop relational linkages to support the exchange of complex uncodified information and tacit knowledge. Finally, the small number of hugely powerful lead firms that drive the automotive industry helps to explain why it has been so difficult to develop and set the industry-level standards that could underpin a more loosely articulated spatial architecture. This case study underlines the need for an open, scalable approach to the study of global industries.

We examine the effects of trade liberalization in China on the evolution of markups and productivity of manufacturing firms. Although these dimensions of performance cannot be separately identified when firm output is measured by revenue, detailed price deflators make it possible to estimate the average effect of tariff reductions on both. Several novel findings emerge. First, cuts in output tariffs reduce markups, but raise productivity. Second, pro-competitive effects are most important among incumbents, while efficiency gains dominate for new entrants. Third, cuts in input tariffs raise both markups and productivity. We highlight mechanisms that explain these findings in the Chinese context. (JEL D24, F13, L25, L60, O14, P31, P33)

Proponents of trade liberalization argue that exporting helps firms to achieve higher productivity levels. This hypothesis is examined for a panel of manufacturing firms in nine African countries. The results indicate that exporters in these countries are more productive and, more importantly, exporters increase their productivity advantage after entry into the export market. While the first finding can be explained by selection-only the most productive firms engage in exporting-the latter cannot. The results are robust when unobserved productivity differences and self-selection into the export market are controlled for using different econometric methods. Scale economies are shown to be an important channel for the productivity advance. Credit constraints and contract enforcement problems prevent firms that only produce for the domestic market from fully exploiting scale economies. D

We present the first comprehensive set of firm-level total factor productivity estimates for China's manufacturing sector that spans her entry into WTO. We find that productivity growth is among the highest compared to other countries. For our preferred estimate, the weighted average annual productivity growth for incumbents is 2.7% for a gross output production function and 7.7% for a value added production function over the period [1998][1999][2000][2001][2002][2003][2004][2005][2006]. Of the various sensitivity checks we carry out, controlling for the increase in labor quality and labor hours, as proxied by the rising real wage, has the largest (downward) effect on the productivity estimates. We further document that new entrants are a particularly dynamic force and that firms experience large productivity declines before exiting from the sample. Overall, net entry contributes roughly half to total TFP growth. Aggregate productivity growth, however, is tempered by a much lower effect of reallocation of inputs towards higher productivity firms, compared to the U.S. benchmark.