Exporting Like China: Productivity, Market Demand, and Labor Frictions

This paper studies the determinants of firms’ export status, with particular emphasis on the dif- ferences between Chinese state-controlled enterprises (SCE) and private-controlled enterprises (PCE). We construct a dynamic model of firms’ export decisions that incorporates labor adjustment costs, productivity shocks, market demands, and trade frictions. The model is estimated using data for both ownership types to analyze the factors influencing their export status. The estimated models align with the observed exporting patterns in China, which are characterized by distinctive differences between PCE and SCE. These differences include the productivity gap between exporters and non-exporters, the interaction between domestic and foreign sales, the skewed distribution of export shares, and the dynamic response of employment to changes in export status. Our analysis highlights the crucial role of demand shocks and labor adjustment costs in shaping the dynamics of export status, especially for PCE. A main finding is that the export decisions of PCE are more responsive to demand, while the export status of SCE is more dependent on productivity.