Product Relatedness and Firm Exports in China

Poncet, Sandra; Starosta de Waldemar, Felipe

doi:10.1093/wber/lht037

Publication: Product Relatedness and Firm Exports in China

cbn

Files in English

English PDF (179.95 KB)

280 downloads

Date

2015-09-29

ISSN

1564-698X

Published

2015-09-29

Author(s)

Poncet, Sandra

Starosta de Waldemar, Felipe

Abstract

We propose the first evaluation using micro-level data of the gains from the consistency of activities with a local comparative advantage. Using firm-level data from Chinese customs over the 2000–6 period, we investigate the relationship between the export performance of firms and how their products relate to local comparative advantage. Our key indicator measures the density of the links between a product and the local product space. Hence, it combines information on the intrinsic relatedness of a good with information on the local pattern of specialization. Our results indicate that exports grow faster for goods that have denser links with those currently produced in the firm's locality. The density of links between products seems to yield export-enhancing spillovers. However, we show that this positive effect of product relatedness on export performance is mainly limited to ordinary trade activities and domestic firms. It is also stronger for more productive firms, suggesting that spillover diffusion may be hindered by insufficient absorptive capacity.

Citation

“Poncet, Sandra; Starosta de Waldemar, Felipe. 2015. Product Relatedness and Firm Exports in China. World Bank Economic Review. © Published by Oxford University Press on behalf of the World Bank. http://openknowledge.worldbank.org/handle/10986/27688 License: CC BY-NC-ND 3.0 IGO.”