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How Trade Liberalization of Intermediates Contributes to China’s Technology Upgrade
Chen Wen (陈雯) and Miao Shuangyou (苗双有)
School of Economics, Xiamen University, Xiamen, China
School of Economics, Zhongnan University of Economics and Law, Wuhan, China
Abstract: Under a heterogeneous firm analysis framework, this paper creates a
theoretical model to investigate how trade liberalization of intermediates influences the
technology choice of firms based on the data of Chinese manufacturers during 2000-
2006. According to our empirical result, after China’s WTO entry, trade liberalization of
intermediates significantly induced Chinese exporters to apply advanced technologies. In
our further consideration of the differentiated productivity of firms, we found that such an
effect is related to the initial productivity of firms and only significantly induces medium-
productivity firms to upgrade their technologies. In addition, the technology-promotion
effect of trade liberalization of intermediates is the most significant for technology-intensive
exporters and the least significant for labor-intensive exporters.
Kpreodyuwcotivridtys: trade liberalization of intermediates, choice of production technology, firm
JEL Classification: F10, F14, D24
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