Anti‐dumping Shock and the Productivity Response of Chinese Industries

• Published date: 01 March 2017
• Date: 01 March 2017
• DOI: http://doi.org/10.1111/cwe.12196
• Author: Chunding Li

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China & World Economy / 107–126, Vol. 25, No. 2, 2017

©2017 Institute of World Economics and Politics, Chinese Academy of Social Sciences

Anti-dumping Shock and the Productivity

Response of Chinese Industries

Chunding Li*

Abstract

This paper provides a comprehensive analysis of the productivity effects of antidumping

(AD) measures on Chinese industries. Industry-year panel data and generalized method

of moments estimators are used in the empirical analysis. Productivity indicators

are calculated using data envelope analysis. The empirical results show that China’s

industrial total factor productivity has improved under the pressure of AD measures

taken by developed countries, and the mechanism inspires technological progress but

hurts technological effi ciency. Developing countries’ AD measures have no signifi cant

productivity effects on China’s targeted industries, except for slightly positive effects on

technological effi ciency. These results indicate that China should pay more attention to

technological innovation and take different counter-measures for different cases of AD

measures.

Key words: antidumping, data envelope analysis, generalized method of moments,

productivity

JEL codes: C23, F12, F13

I. Introduction

As its export volume and trade surplus grew over the past decade, China became the

world’s largest recipient of antidumping (AD) measures. How these AD measures

affect China’s trade and economy is an important topic for research. This paper aims to

comprehensively explore the productivity effects of AD measures on Chinese industries.

The effects of AD measures are hot trade topics in the literature, with scholars aiming

to capture the infl uences of AD measures from many perspectives, including trade (Staiger

and Wolack, 1994; Prusa, 2001; Ganguli, 2008; Baylis et al., 2009; Carter and Trant,

*Chunding Li, Research Fellow, Institute of World Economics and Politics, Chinese Academy of Social

Sciences, China. E-mail: lichd@cass.org.cn. I am grateful to the Research Center for Chinese Politics and

Business of Indiana University for fi nancial support, and to Scott Kennedy, Chunbing Xing, Xiaojun Shi,

Risheng Mao and Xiliang Zhao for helpful comments. I appreciate the editors’ and referees’ constructive

suggestions. I thank Maureen Ryan for her help with language.

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Anti-Dumping Shock and Productivity Response

Chunding Li / 107–126, Vol. 25, No. 2, 2017

©2017 Institute of World Economics and Politics, Chinese Academy of Social Sciences

2010), price (Prusa, 1994), production (Leidy and Hoekman, 1990), welfare (Devault,

1996; Gallaway et al., 1999), profi t (Konings and Vandenbussche, 2005), foreign direct

investment (Girma et al., 2002; Belderbos et al., 2004), market power (Nieberding, 1999)

and fi rm-level reactions (Konings and Vandenbussche, 2009; Pierce, 2013).

Only a few of the abovementioned studies have directed their attention to the

productivity effects of AD measures. Konings and Vandenbussche (2004) analyze the

relationship between AD protection and productivity growth using fi rm-level data and

find that AD protection could induce technological catch-up by domestic firms that

are affected by the import protection. Crowley (2006) sets up a theoretical model and

shows that a country-specifi c tariff like an AD duty encourages both domestic import-

competing fi rms and foreign exporting fi rms to adopt new technology earlier than they

would under free trade. Konings and Vandenbussche (2008) fi nd that domestic fi rms

with relatively low initial productivity had productivity gains during protection, whereas

fi rms with high initial productivity experienced productivity losses during protection.

Chandra and Long (2013) fi nd that the imposition of an AD duty by the USA led to as

much as a 20-percent decrease in labor productivity for the Chinese firms that were

specifi cally named in the AD duties.

Based on our review of the current literature, we find that present research on AD

productivity effects is rare and the area has yet to be adequately explored. Productivity

response is an important fi eld of research as it deals with economic growth. Therefore, we

direct our research towards exploring the productivity reactions of Chinese industries to AD

measures. The primary distinction between the current paper and previous studies is that we

aim to explore both the infl uence of AD measures and the channels of these measures.

We use China’s industry-year panel data and the generalized method of moments (GMM)

to capture the infl uence of AD measures on the productivity of targeted Chinese industries.

Data envelope analysis (DEA) is used to calculate and decompose total factor productivity

(TFP), and a series of productivity variables have been used to comprehensively explore the

effects as well as the channels of infl uence of AD measures.

The empirical data in our research is 2-digit industry-level data, but most of the

AD cases are usually related to a narrow segment of industries (often 4–8 digit HS

classifi cation products). As such, it appears that the effects of AD measures on 2-digit

industries are not very direct, which may underestimate the infl uence of AD measures

on the specifi cally targeted products. For example, most of the AD cases against Chinese

steel companies have focused on either construction steel or various types of cold-rolled

steel. Yet, our empirical analysis captures the infl uence of AD measures on the entire

metallurgy smelting industry, which includes all types of steel. Therefore, the ideal data

for analyzing AD effects is product-level data, which is broader than fi rm-specifi c data,