Quota removal and firm-level offshoring: Theory and evidence |
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Affiliation: | 1. School of Mathematics and Statistics, Xi''an Jiaotong University, 710049 Xi''an, Shaanxi, People''s Republic of China;2. Company of the 401 Research Institute of CASC, 710025 Xi''an, Shaanxi, People''s Republic of China;3. Jinhe Center for Economic Research, Xi''an Jiaotong University, 710049 Xi''an, Shaanxi, People''s Republic of China |
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Abstract: | Recent literature indicates that offshoring can effectively increase firm productivity and improve product quality. Therefore, global value chains have increased in importance. In this paper, we investigate the impact of export growth on firm-level offshoring. Removal of the quota on textile and clothing products in importing countries boosts China's exports of quota-restricted products. This removal offers a quasi-natural experiment. Using a difference-in-differences approach, we find that export growth induced by the quota removal increases the extensive and intensive margins of firm-level offshoring. The impact is more pronounced on domestic firms and firms that are engaged in ordinary trade. Our findings suggest additional gains from trade liberalization: trade liberalization not only boosts exports, but also enhances firm productivity and product quality through encouraging firm-level offshoring. |
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Keywords: | Offshoring Textiles and clothing Quota removal F10 F14 L11 |
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