Institutional Environment as a Determinant of Chinese Private Firm Export Behaviors

899 WordsFeb 2, 20184 Pages
Institutional Environment as a Determinant of Chinese Private Firm Export Behaviors:Does productivity counter the effect of institutional environment? We introduce “institutional environment” as a measure of the degree to which policies and institutes in one region differ from those in another region in china, where market are distorted across space and region[1]. We employ a modified heterogeneous firm model developed by Mayer and Melitz et al(2011)[12] to examine whether such institutional environment differences affect the firms’ export behavior. Employing data for china firm-level exports in 29 province for which measures of institutional environment can be constructed, we find that better institutional environment enhances firm’s export behavior. This results holds for the low level of financial constrains firms, but are reversed by the con-export effect of productivity in the aggregate firms and the high level of financial constraints firms. Productivity is found to exert a con-export effect that completely offsets the trade-enhancing effects of institutional environment. I. Introduction Despite a voluminous literature on the impact of firm productivity on export behavior,the effects that institutional environment differences among regions may have on firm’s export behavior and the extent to which productivity may counter these effects have received little attention. Institutional environment difference is defined as the degree to which policies and regulations

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