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How the Internet Promotes China's Exports: A Firm‐level Perspective
Author(s) -
Mu Yifei,
Chen Zhen,
Ding Yibing,
Wang Yuqing,
Pang Bo
Publication year - 2020
Publication title -
china and world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.815
H-Index - 28
eISSN - 1749-124X
pISSN - 1671-2234
DOI - 10.1111/cwe.12329
Subject(s) - china , the internet , business , information and communications technology , margin (machine learning) , industrial organization , government (linguistics) , estimation , fixed cost , value (mathematics) , international trade , economics , international economics , linguistics , philosophy , management , accounting , machine learning , world wide web , political science , computer science , law
The development of information and communications technology (ICT), particularly the Internet, has reduced trade costs. However, it remains unclear whether these reduced costs are reflected in the “extensive margins” of firms’ exports (which refer to the probability of firms exporting) or the “intensive margins” (which refer to the value of firms’ export). To test this, we used the concepts of information cost and binary margins, an augmented trade model of firm heterogeneity, a two‐stage Heckman estimation, and data from the World Bank Enterprise Survey of Chinese firms in 2012. The results revealed that reduced trade costs from the use of ICT were positively related to extensive margins but that the connection with intensive margins was not significant. The results lead to the conclusion that reduced information costs related to a firm's exporting behavior were primarily reflected in variable trade costs. This study offers theoretical and empirical evidence for China's policies towards the Internet, which are relevant for the export of manufactured goods. The government should encourage the use of ICT to enhance firms’ export opportunities while facing current trade policy uncertainty.