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Zhiwei Zhang

Bio: Zhiwei Zhang is an academic researcher from International Monetary Fund. The author has contributed to research in topics: Stylized fact & Multinational corporation. The author has an hindex of 8, co-authored 8 publications receiving 1712 citations.

Papers
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TL;DR: In this paper, stylized facts about firms' export prices using detailed customs data on the universe of Chinese trade flows are established, showing that exporters that charge higher prices earn greater revenues in each destination, have bigger worldwide sales, and enter more markets.
Abstract: This paper establishes six stylized facts about firms' export prices using detailed customs data on the universe of Chinese trade flows. First, across firms selling a given product, exporters that charge higher prices earn greater revenues in each destination, have bigger worldwide sales, and enter more markets. Second, firms that export more, that enter more markets and that charge higher export prices import more expensive inputs. Third, across destinations within a firm-product, firms set higher prices in richer, larger, bilaterally more distant and overall less remote countries. Fourth, across destinations within a firm-product, firms earn bigger revenues in markets where they set higher prices. Fifth, across firms within a product, exporters with more destinations offer a wider range of export prices. Finally, firms that export more, that enter more markets and that offer a wider range of export prices pay a wider range of input prices and source inputs from more origin countries. We propose that trade models should incorporate two features to rationalize these patterns in the data: more successful exporters use higher-quality inputs to produce higher-quality goods (stylized facts 1 and 2), and firms vary the quality of their products across destinations by using inputs of different quality levels (stylized facts 3, 4, 5 and 6).

511 citations

Journal ArticleDOI
TL;DR: In this paper, stylized facts about firms' export prices using detailed customs data on the universe of Chinese trade flows are established, showing that firms that export more, enter more markets, and charge higher export prices import more expensive inputs.
Abstract: This article establishes six stylized facts about firms' export prices using detailed customs data on the universe of Chinese trade flows. First, across firms selling a given product, exporters that charge higher prices earn greater revenues in each destination, have bigger worldwide sales, and enter more markets. Second, firms that export more, enter more markets, and charge higher export prices import more expensive inputs. Third, across destinations within a firm-product, firms set higher prices in richer, larger, bilaterally more distant and overall less remote countries. Fourth, across destinations within a firm-product, firms earn bigger revenues in markets where they set higher prices. Fifth, across firms within a product, exporters with more destinations offer a wider range of export prices. Finally, firms that export more, enter more markets, and offer a wider range of export prices pay a wider range of input prices and source inputs from more origin countries. We propose that trade models should incorporate two features to rationalize these patterns in the data: more successful exporters use higher quality inputs to produce higher quality goods (stylized facts 1 and 2), and firms vary the quality of their products across destinations by using inputs of different quality levels (stylized facts 3, 4, 5, and 6). Copyright 2012, Oxford University Press.

507 citations

Posted Content
TL;DR: In this paper, the authors provide firm-level evidence that credit constraints restrict international trade flows and affect the sectoral pattern of multinational activity using detailed customs data from China, they show that foreign affiliates and joint ventures have better export performance than private domestic firms in financially more vulnerable sectors
Abstract: This paper provides firm-level evidence that credit constraints restrict international trade flows and affect the sectoral pattern of multinational activity Using detailed customs data from China, we show that foreign affiliates and joint ventures have better export performance than private domestic firms in financially more vulnerable sectors These results are stronger for destinations with higher trade costs and not driven by variation in firm size or by other sector determinants of FDI Our findings are consistent with multinational subsidiaries being less liquidity constrained because they can tap additional funding from their parent company and/or access foreign capital markets More broadly, they suggest that FDI can alleviate the impact of domestic financial market imperfections on aggregate growth, trade and private sector development

325 citations

Journal ArticleDOI
TL;DR: In this paper, the authors provide firm-level evidence that credit constraints restrict international trade and affect the pattern of multinational activity and show that foreign affiliates and joint ventures in China have better export performance than private domestic firms in financially more vulnerable sectors.
Abstract: We provide firm-level evidence that credit constraints restrict international trade and affect the pattern of multinational activity. We show that foreign affiliates and joint ventures in China have better export performance than private domestic firms in financially more vulnerable sectors. These results are stronger for destinations with higher trade costs and not driven by firm size or other sector characteristics. Our findings are consistent with multinational subsidiaries being less liquidity constrained because they can access foreign capital markets or funding from their parent company. They further suggest that FDI can alleviate the impact of domestic financial market imperfections on trade.

249 citations

Journal ArticleDOI
TL;DR: The authors showed that foreign-owned affiliates and joint ventures have better export performance than private domestic firms, and that this advantage is systematically greater in sectors at higher levels of financial vulnerability measured in a variety of ways.
Abstract: This paper provides firm-level evidence that credit constraints restrict international trade flows and affect the pattern of foreign direct investment. Using detailed data from China, we show that foreign-owned affiliates and joint ventures have better export performance than private domestic firms, and that this advantage is systematically greater in sectors at higher levels of financial vulnerability measured in a variety of ways. These patterns are manifest in firms' export sales, export product scope and number of export destinations. They are also more pronounced when firms face higher trade costs. This evidence indicates that limited credit availability hinders firms' trade flows, and is consistent with foreign affiliates being less constrained because they can access additional funding from their parent company. Our results further imply that financial frictions and host-country financial institutions affect the sectoral and spatial composition of MNC activity. More broadly, our findings suggest that FDI can compensate for domestic financial market imperfections and alleviate their impact on aggregate growth, trade and private sector development.

149 citations


Cited by
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Journal ArticleDOI
TL;DR: In this paper, the authors studied the impact of a regional free trade agreement, MERCOSUR, on technology upgrading by Argentinean firms and showed that the increase in revenues produced by trade integration can induce exporters to upgrade technology.
Abstract: This paper studies the impact of a regional free trade agreement, MERCOSUR, on technology upgrading by Argentinean firms. To guide empirical work, I introduce technology choice in Melitz’s (2003) model of trade with heterogeneous firms. The joint treatment of the technology adoption and exporting choices shows that the increase in revenues produced by trade integration can induce exporters to upgrade technology. An empirical test of the model reveals that firms in industries facing higher reductions in Brazil’s import tariffs increase their investment in technology faster and exporters upgrade technology faster than other firms in the same industry.

1,365 citations

Journal ArticleDOI
TL;DR: This paper examined the impact of Chinese import competition on broad measures of technical change (patenting, IT, and TFP) using new panel data across twelve European countries from 1996 to 2007 and found that the absolute volume of innovation increases within the firms most affected by Chinese imports in their output markets.
Abstract: We examine the impact of Chinese import competition on broad measures of technical change—patenting, IT, and TFP—using new panel data across twelve European countries from 1996 to 2007. In particular, we establish that the absolute volume of innovation increases within the firms most affected by Chinese imports in their output markets. We correct for endogeneity using the removal of product-specific quotas following China's entry into the World Trade Organization in 2001. Chinese import competition led to increased technical change within firms and reallocated employment between firms towards more technologically advanced firms. These within and between effects were about equal in magnitude, and account for 14% of European technology upgrading over 2000–7 (and even more when we allow for offshoring to China). Rising Chinese import competition also led to falls in employment and the share of unskilled workers. In contrast to low-wage nations like China, developed countries had no significant effect on innovation.

1,139 citations

Posted Content
TL;DR: In this article, a growth model that is consistent with salient features of the Chinese growth experience since 1992 is presented, which includes high output growth, sustained returns on capital investments, extensive reallocation within the manufacturing sector, falling labor share and accumulation of a large foreign surplus.
Abstract: This paper constructs a growth model that is consistent with salient features of the Chinese growth experience since 1992: high output growth, sustained returns on capital investments, extensive reallocation within the manufacturing sector, falling labor share and accumulation of a large foreign surplus. The theory makes only minimal deviations from a neoclassical growth model. Its building blocks are financial imperfections and reallocation among firms with heterogeneous productivity. Some firms use more productive technologies than others, but low-productivity firms survive because of better access to credit markets. Due to the financial imperfections, high-productivity firms - which are run by entrepreneurs - must be financed out of internal savings. If these savings are sufficiently large, the high-productivity sector outgrows the low-productivity sector, and attracts an increasing employment share. During the transition, low wage growth sustains the return to capital. The downsizing of the financially integrated sector forces a growing share of domestic savings to be invested in foreign assets, generating a foreign surplus. We test some auxiliary implications of the theory and find robust empirical support.

1,054 citations

Journal ArticleDOI
TL;DR: In this article, the authors derive an estimating equation to estimate markups using standard production plant-level data based on the insight of Hall (1986) and the control function approach of Olley and Pakes (1996), which allows for various underlying price setting models, dynamic inputs, and does not require measuring the user cost of capital or assuming constant returns to scale.
Abstract: Estimating markups has a long tradition in industrial organization and international trade. Economists and policy makers are interested in measuring the effect of various competition and trade policies on market power, typically measured by markups. The empirical methods that were developed in empirical industrial organization often rely on the availability of very detailed market-level data with information on prices, quantities sold, characteristics of products and more recently supplemented with consumer-level attributes. Often, both researchers and government agencies cannot rely on such detailed data, but still need an assessment of whether changes in the operating environment of firms had an impact on markups and therefore on consumer surplus. In this paper, we derive an estimating equation to estimate markups using standard production plant-level data based on the insight of Hall (1986) and the control function approach of Olley and Pakes (1996). Our methodology allows for various underlying price setting models, dynamic inputs, and does not require measuring the user cost of capital or assuming constant returns to scale. We rely on our method to explore the relationship between markups and export behavior using plant-level data. We find that i) markups are estimated significantly higher when controlling for unobserved productivity, ii) exporters charge on average higher markups and iii) firms’ markups increase (decrease) upon export entry (exit). We see these findings as a first step in opening up the productivity-export black box, and provide a potential explanation for the big measured productivity premia for firms entering export markets.

809 citations

Journal ArticleDOI
TL;DR: In this article, a model of endogenous input and output quality choices by heterogeneous firms was proposed to explain the observed price-plant correlation. But the empirical patterns are consistent with a parsimonious extension of the Melitz (2003, “The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity,” Econometrica, 71, 1695-1725) framework to include endogenous choice of input andoutput quality.
Abstract: Drawing on uncommonly rich and representative data from the Colombian manufacturing census, this paper documents new empirical relationships between input prices, output prices, and plant size and proposes a model of endogenous input and output quality choices by heterogeneous firms to explain the observed patterns. The key empirical facts are that, on average within narrowly defined sectors, (1) larger plants charge more for their outputs and (2) larger plants pay more for their material inputs. The latter fact generalizes the well-known positive correlation between plant size and wages. Similar correlations hold between prices and export status. We show that the empirical patterns are consistent with a parsimonious extension of the Melitz (2003, “The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity,” Econometrica, 71 , 1695–1725) framework to include endogenous choice of input and output quality. Using a measure of the scope for quality differentiation from Sutton (1998, Technology and Market Structure: Theory and History . Cambridge: MIT Press), we show that differences across sectors in the relationships between prices and plant size are consistent with our model. Available evidence suggests that differences in observable measures of market power do not provide a complete explanation for the empirical patterns. We interpret the results as supportive of the hypothesis that quality differences of both inputs and outputs play an important role in generating the price–plant size correlations.

699 citations