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Managing trade: evidence from China and the US

Bloom, Nick, Manova, Kalina, Teng Sun, Stephen, Van Reenen, John and Yu, Zhihong (2018) Managing trade: evidence from China and the US. CEP Discussion Papers (CEPDP1553). Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Abstract

We present a heterogeneous-firm model in which management ability increases both production efficiency and product quality. Combining six micro-datasets on management practices, production and trade in Chinese and American firms, we find broad support for the model's predictions. First, better managed firms are more likely to export, sell more products to more destination countries, and earn higher export revenues and profits. Second, better managed exporters have higher prices, higher quality, and lower quality-adjusted prices. Finally, they also use a wider range of inputs, higher quality and more expensive inputs, and imported inputs from more advanced countries. The structural estimates indicate that management is important for improving production efficiency and product quality in both countries, but it matters more in China than in the US, especially for product quality. Panel analysis for the US and a randomized control trial in India suggest that management exerts causal effects on product quality, production efficiency, and exports. Poor management practices may thus hinder trade and growth, especially in developing countries.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/
Additional Information: © 2018 The Authors
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
JEL classification: F - International Economics > F1 - Trade > F10 - General
F - International Economics > F1 - Trade > F14 - Country and Industry Studies of Trade
F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms; International Business
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L20 - General
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O19 - International Linkages to Development; Role of International Organizations
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O32 - Management of Technological Innovation and R&D
Sets: Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 27 Jun 2018 09:42
Last Modified: 20 Feb 2019 04:08
Funders: Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/88703

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