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Quantity restrictions and price adjustment of Chinese textile exports to the U.S.

Bernhofen, Daniel M.; Upward, Richard; Wang, Zheng

Authors

Daniel M. Bernhofen dbernhof@american.edu

Zheng Wang z.wang@dmu.ac.uk



Abstract

The elimination of the Multifibre Arrangement (MFA) in 2005 provides an unusual opportunity to examine the effects of a trade policy shock on export prices and firm behaviour. It was massive in scale, discrete in timing and exogenous to firms and consumers in the textile industry. Since the MFA quota removal did not affect all textile products at the same time, we are able to use a difference-in-difference approach to estimate the causal effects of the MFA. Using transaction-level data from the Chinese Customs Trade Statistics over the period 2000-2006, we find that the MFA removal reduced average export prices by about 25%. This fall was mainly caused by a combination of the entry of new low-price exporters and new low-price products, rather than a fall in prices of existing firm-product combinations. We also find that price reductions are twice as large for heterogeneous than for homogeneous products.

Journal Article Type Article
Publication Date 2018-11
Journal World Economy
Print ISSN 0378-5920
Electronic ISSN 1467-9701
Publisher Wiley
Peer Reviewed Peer Reviewed
Volume 41
Issue 11
Pages 2983-3000
APA6 Citation Bernhofen, D. M., Upward, R., & Wang, Z. (2018). Quantity restrictions and price adjustment of Chinese textile exports to the U.S. World Economy, 41(11), 2983-3000. doi:10.1111/twec.12581
DOI https://doi.org/10.1111/twec.12581
Keywords MFA, Chinese exports, US, textile
Publisher URL http://onlinelibrary.wiley.com/doi/10.1111/twec.12581/full
Copyright Statement Copyright information regarding this work can be found at the following address: http://eprints.nottingh.../end_user_agreement.pdf
Additional Information This is the peer reviewed version of the following article: Bernhofen D, Upward R, Wang Z. Quantity restrictions and price adjustment of Chinese Textile Exports to the US. World Econ. 2017;00:1–18. https://doi.org/10.1111/twec.12581 which has been published in final form at http://onlinelibrary.wi...10.1111/twec.12581/full This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.

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Copyright Statement
Copyright information regarding this work can be found at the following address: http://eprints.nottingham.ac.uk/end_user_agreement.pdf





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