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CEP discussion paper

Trade liberalization, input intermediaries and firm productivity: evidence from China


We investigate theoretically and empirically the role of wholesalers in mediating the productivity effects of trade liberalization. Intermediaries provide indirect access to foreign produced inputs. The productivity effects of input tariff cuts on firms that do not directly import therefore depends on the extent that wholesalers are a feature of input supply within an industry. Using firm level data from China, we document that wholesalers play no such role for direct importers. However, other firms experience productivity gains from reducing input tariffs if trade intermediation of foreign inputs within their sector is high. They suffer efficiency losses otherwise.


Fabrice Defever, Michele Imbruno and Richard Kneller

10 December 2019     Paper Number CEPDP1666

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This CEP discussion paper is published under the centre's Trade programme.