Input Trade Liberalization and Export Product Scope: Evidence from China

Abstract

This paper explores the impact of input trade liberalization on export product scope of firms in industries with different scope for product differentiation. Firm- and industry-specific tariffs are measured to reflect cost effect (intensive margin) and new input effect (extensive margin) of input tariff reductions. Using tariff data and product-level trade data for 2002-2006, we find that while firms in differentiated product scope expand export product lines greatly, firms in non-differentiated product sector do not expand export product scope significantly, which is robust to different definitions of varieties.