The impacts of exporting to China: assessing the productivity gains of developing countries using an instrumental variable approach

ABSTRACT

Developing countries have taken substantial measures to liberalize protected domestic markets to facilitate international trade. However, market liberalization often depends on policies of export expansion and innovations, raising the question: Is export expansion sufficient for productivity gains of developing countries? How does export expansion mediate the relationship between innovations and productivity gains? Are further policy interventions necessary? Hence, this study examines the impacts of developing countries’ exports to China on productivity gains from 1992-2022. Further, it investigates how innovations mediate the relationship between export expansion and productivity gains. The 2SLS method is applied for estimation, which addresses the endogeneity by using export expansion to China from other developing countries. The findings reveal that exports positively impact productivity driven by China’s rise. Innovations and learning by exporting significantly mediate the association between key variables. It highlights how developing countries benefit from China’s growth, contributing insights to trade and economic growth literature.

KEYWORDS:

• China trade shocks
• export expansion
• productivity gains
• instrumental variable
• developing countries

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

The dataset used during the current study is available from the corresponding author upon reasonable request.

Notes

1. See also (Bustos 2011), and (Lileeva and Trefler 2010) for the same conclusion.

2. As there is no exact definition of developing countries. Therefore, this study employs HDI of United Nations Development Program (UNDP) and considered countries above 0.75 as developed and below 0.35 as least-developed countries.

Additional information

Notes on contributors

Kalsoom Rafique

Kalsoom Rafique is an assistant professor at Tianshui Normal University, Tianshui, originally from Pakistan. Her research contributions encompass various facets of labor markets, gains from trade, sustainability, and climate change. Dr. Kalsoom Rafique got her PhD from Zhongnan University of Economics and Law, Wuhan, China, where her doctoral research focused on A study on Gains from Exporting to China for Developing Countries, demonstrating her expertise in international economics and trade, labor markets, and environmental economics

Yang Qi

Yang Qi is a lecturer at the School of Foreign Languages, Tianshui Normal University, Tianshui. She has a Master of English Literature from Hunan University of Science and Technology, Hunan, China. Yang mainly engaged in research areas such as English and American literary translation and teaching methods.

Shah Abbas

Shah Abbas is a Postdoctoral Fellow at China University of Geosciences, Wuhan, with a distinguished track record in studying green technological innovation, renewable energy transition, environmental regulation, and achieving net-zero carbon emissions. Dr. Abbas got his PhD from Zhongnan University of Economics and Law, Wuhan, China, where his doctoral research focused on analyzing the determinants of Global Value Chain participation across Asian countries, demonstrating his expertise in international economics and trade, resources, and environmental economics.