The Gains From Import And Export Diversification:Mechanism And Evidence

The Gains from trade is the fundamental driver of the creation of international trade. It is also a subject in the theory of international trade that is worth of research although there were many previous literatures. Traditional trade theories were based on the assumption of perfect competition and homogeneous products, and researched the welfare effects of international trade from the static perspective. Dixit and Stigliz(1977) first put forward the D-S model which embodied the product variety. Based on the logical starting point provided by the model, Krugman et al(1979, 1980) extended the sources of gains from trade to the declining pricing ability for firms, increasing returns to scale and diversification of products. On the basis of new trade theory, Growth theory and Heterogeneity Firms trade theory farther interpret the gains from trade nature from different angles. Product diversification not only increases the static gains from trade, but also has positive impacts on a country’s technologic progress, economic growth and improvement of terms of trade. Since 1990 s, China’s import and export trade grew rapidly. Then, with the growth of China’s aggregate trade, how did import and export product diversification develop? On what aspects do the gains from trades showed which were brought by the diversification of import and export products? To revaluate the characteristics and effects of China’s trade growth from the perspectives of product diversification, it is not only of theoretical value, but also has practical value for how to explore expanding gains from trade channels and to improve trade policy-making.This dissertation systematically summarizes and generalizes the gains from trade of import and export product diversification and its generation mechanism, comprehensively adopts many measurement methods to examine characteristics and facts of China’s import and export product diversification, and carries out empirical tests on the gains from trade of import and export product diversification using China’s manufacture sub-sectors panel data. By theoretical analysis and empirical research, this dissertation’s main findings are:(1) The gains from trade of import and export product diversification show in the following aspects: The first is that it is conducive to the increase of Total Factor Productivity. Export product diversification has positive impacts on Total Factor Productivity through resource reallocation effects, "learn by exporting" effect and export technology spillover effect. Import product diversification promotes the improvement of Total Factor Productivity mainly through direct productivity effect, import technology spillover effect and import competition effect. The second is that import and export product diversification can reduce output fluctuation. Import and export product diversification can relieve terms of trade fluctuation, diversify risk and play the role of "international insurance system", thus alleviate the negative influence on output fluctuation brought by trade opening up. The third is import and export product diversification is beneficial to terms of trade improvement. When trade increase come from the increase of product variety, the terms of trade index related to the change of product variety is higher than the terms of trade index related to the fixed product variety, this shows that import and export product diversification can improve terms of trade.(2) Viewed from macro perspective, China’s import and export product diversification tends to be declining in general, and the increase of import and export is mainly quantitative increase rather than the increase of product variety. Cross-section international comparison with G7(Group of Seven) and other BRICS countries show that, weight distribution of China’s export product variety is comparatively more diversified, but China’s quantitative trade growth features is more remarkable than G7 and other BRICS countries. Within manufacturing sector, manufacturing sub-sectors’ import and export product diversification shows more pronounced industry heterogeneity.(3) Compared with export product diversification, the gains from trade from import product diversification was verified more by China’s manufacturing empirical research. Empirical tests show: First, import product diversification remarkably contribute to the increase of manufacturing Total Factor Productivity, but export product diversification contribute to the depression of manufacturing Total Factor Productivity. The main reasons for "the export product diversification productivity paradox" are the processing-trade-focus trade pattern and export product diversification’s focusing on low technology industry. Second, import product diversification reduce the negative influences of manufacturing output fluctuation caused by trade opening up, and has a repressing effect on product fluctuation. But because the quality of export product diversification is not high, export product diversification still can not effectively reverse the negative influence on output fluctuation caused by trade opening up. Third, export product diversification effectively improve manufacturing sector’s terms of trade, but import product diversification worsen terms of trade, this is maybe related to the fact that import extension marginal increase is concentrated in the oil processing industry.The new contributions of this dissertation are: First, from the perspective of product diversification, I systematically analyze and summarize the gains from trade and its generation mechanism. Second, by getting over the limitation of unique measurement method, I comprehensively use concentration degree index, Feenstra index and expanded marginal method based on dual marginal composition to examine the development of China’s import and export product diversification from multitude angles. Third, based on China’s manufacturing sub-sectors panel data, I conduct comprehensive and in-depth empirical tests on import and export product diversification’s Total Factor Productivity effect, output fluctuation depressing effect and trade-terms improvement effect, thus providing a developing large country’s empirical sample for the study of product diversification and gains from trade.