Importing exporters and exporting importers: A study of the decision of Chinese firms to engage in international trade

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Abstract

This paper examines the complex and interdependent relationship between importing and exporting for a panel of Chinese manufacturing firms. We estimate the decision to import and export simultaneously within a dynamic random-effects bivariate probit framework addressing the endogenous initial conditions problem. Results show that decisions to export and import are simultaneously determined and that sunk-entry costs play a significant role in a firm's decision to enter international markets. Costs are larger for exporting. We also find a substitution effect between the two decisions. The substitutability between exporting and importing is greater for financially constrained private firms.

Details

Original languageEnglish
JournalReview of International Economics
Early online date9 Sep 2018
Publication statusE-pub ahead of print - 9 Sep 2018