Service liberalization and export market power——Evidence from chinese manufacturing firm-product level data

Abstract

This paper studies the impact of service liberalization on the export markup of manufacturing firms and possible channels.The results show that service liberalization significantly improves manufacturing firms’ export markup. The influencing mechanism analysis and tests show that TFP improvement and quality upgrading are the two possible channels through which the liberalization of service trade can improve the export markup of manufacturing firms. In addition, firms with a lower proportion of state-owned capital, higher management efficiency, lower export intensity and products that are closer to core competency are more profoundly affected by the markup-increasing effect brought by the service liberalization. Our research conclusions uncover that service openness could help to improve the export market competitiveness of manufacturing firms measured by export markups.