Intermediate Inputs Import, Product Switching and Structure Upgrading of Firm’s Factor Endowment
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| Title | Intermediate Inputs Import, Product Switching and Structure Upgrading of Firm’s Factor Endowment
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| Author | Qian Xuefeng and Wang Bei |
| Organization | Zhongnan University of Economics and Law |
| Email | xfqian@126.com |
| Key Words | Importing; intermediate inputs; Product switching; Factor intensity |
| Abstract | Transformation and upgrading of China's trade development should aim to improve structure of factor endowments. This paper constructs a general equilibrium trade model introduced in intermediate inputs and factors density difference assumption, analyzes the influence of firms import intermediate inputs and product switching behavior to their factor endowment structure. The conclusion of our theoretical model show that: (1) the firm's own productivity and the productivity comparative advantage of intermediate inputs will affect their decision-making for importing, productive firms are more likely to import intermediate inputs; (2) the factor density of intermediate inputs can affect its productivity comparative advantage and import gains of firms, so firms will adjustment the number and scale of import according to the factor density which resulting product switching behavior; (3) the import switching through intermediate inputs flow changes the firm's element density ,and finally improve their structure of factor endowments. Further empirical research shows that imports of intermediate inputs increase firm's capital density about 0.4% and the product switching promote about 0.3%. It increases capital density through importing dual margin, but extensive margin has a bigger role than intensive margin. Therefore, by further trade liberalization, reduce the external policy constraints which restrict firm import intermediate inputs and product switching will help to improve their structure of factor endowments, and further improve the production and trade structure of the whole economy, eventually to drive the trade transformation and upgrade of China. |
| Serial Number | WP904 |
| Time | 2015-07-28 |
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