Antonia Reinecke & Hans-Jörg Schmerer
Forthcoming in: Journal of Chinese Economic and Business Studies 15 (2017)
This paper investigates the role of local governments’ efficiency on exports in China. We argue that firms located in provinces characterized by high governmental efficiency export more due to a positive productivity effect that lowers transaction costs. The analysis builds on NBS firm-level data that covers a representative sample of Chinese establishments. We find a positive correlation between provincial governments efficiency and Chinese firm’s exports. Moreover, we are able to show that the positive link between firm size and exports is magnified by governmental efficiency. Larger firms export more and this relationship is much stronger in provinces with more efficient provincial governments.