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The role of firm factors in demand, cost, and export market selection for Chinese footwear producers

Roberts, Mark J. and Yi Xu, Daniel and Fan, Xiaoyan and Zhang, Shengxing (2018) The role of firm factors in demand, cost, and export market selection for Chinese footwear producers. Review of Economic Studies, 85 (4). pp. 2429-2461. ISSN 0034-6527

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Identification Number: 10.1093/restud/rdx066

Abstract

In this article, we use micro data on both trade and production for a sample of large Chinese manufacturing firms in the footwear industry from 2002 to 2006 to estimate an empirical model of export demand, pricing, and market participation by destination market. We use the model to construct indexes of firm-level demand, marginal cost, and fixed cost. The empirical results indicate substantial firm heterogeneity in all three dimension with demand being the most dispersed. The firm-specific demand and marginal cost components account for over 30% of market share variation, 40% of sales variation, and over 50% of price variation among exporters. The fixed cost index is the primary factor explaining differences in the pattern of destination markets across firms. The estimates are used to analyse the supply reallocation following the removal of the quota on Chinese footwear exports to the EU. This led to a rapid restructuring of export supply sources on both the intensive and extensive margins in favour of firms with high demand and low fixed costs indexes, with marginal cost differences not being important.

Item Type: Article
Official URL: https://academic.oup.com/restud
Additional Information: © 2017 The Author
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HF Commerce
JEL classification: F - International Economics > F1 - Trade > F14 - Country and Industry Studies of Trade
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L25 - Firm Performance: Size, Diversification and Scope, Age, Profit, and Sales
Sets: Departments > Economics
Collections > Economists Online
Date Deposited: 13 Nov 2018 11:16
Last Modified: 13 Nov 2018 11:43
URI: http://eprints.lse.ac.uk/id/eprint/90575

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