Journal of Chemical and Pharmaceutical Research (ISSN : 0975-7384)

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Original Articles: 2014 Vol: 6 Issue: 5

Export facilitation and comparative advantages of the Chinese low-technology manufactures: A panel granger causality analysis


This study empirically examines the causal relationship between the changing comparative advantages and the net exports of the Chinese low-technology manufactures, with an attempt to answer the question of whether the governmental export facilitation efforts can effectively improve the comparative advantage of specific industries. By employing panel data analysis of the Chinese trade in low-technology manufactures ranging from 1987 to 2011, we find that 1) the Chinese net export capabilities are significantly above the comparative advantage, strongly indicating a tendency of the Chinese trade protection which is featured with export facilitation in the past decades; 2) comparative advantage Granger causes net exports in long-run, which is consistent to the Ricardian prediction that comparative advantage determines net exports of an industry; 3) the short-run effect of comparative advantage upon the net exports of the Chinese low-technology manufactures is significantly negative, implying that a drop in the comparative advantage does encourage the Chinese government to take export facilitation measures; and 4) the Granger causal relationship is uni-directional. Specifically, we find no evidence that export facilitation can effectively improve the comparative advantages of the Chinese low-technology manufactures. A possible explanation is that the export facilitation mainly targets at improving the domestic employment instead of the technology-based comparative advantages.