The School of Economics invites you to a Macro/Trade seminar by Shengyu Li (University of New South Wales).

Abstract

We develop a dynamic structural model to analyze the impact of input tariff liberalization on input prices, trading decisions, productivity, and  firm performance. While input tariff liberalization directly the affects input price benefits of importing, its impact on trade participation generates indirect benefits through additional channels, such as productivity improvements and complementarity between importing and exporting. To disentangle these effects, our model separately measures importing’s effect   on intermediate input prices and productivity.  We apply the model to examine the reaction of Chinese paint manufacturers  to China’s accession to the World Trade Organization (WTO). We find a mild short-term effect of input tariff liberalization  in the   industry. The effect is amplified in the long run by induced trade participation, resulting in even higher aggregate productivity and lower input prices. Overall, this effect increases the average  present firm value  by 2.3 percent.