Expanding export variety: The role of institutional reforms in developing countries

This paper presents theory and evidence that institutional reforms in developing countries can help expand their product varieties in exports. Our model suggests that relaxing ownership restrictions on foreign direct investment, improving contract enforcement, and reducing offshoring cost can induce...

Full description

Saved in:
Bibliographic Details
Published in:Journal of development economics 2016-01, Vol.118, p.45-58
Main Authors: Sheng, Liugang, Yang, Dennis Tao
Format: Article
Language:English
Subjects:
China
Contract environment
Developing countries
Export variety
Exports
Foreign direct investment
Foreign investment
LDCs
Multinational corporations
Multinational enterprises
Organizational change
Ownership structure
Policy reform
Processing trade
Studies
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:This paper presents theory and evidence that institutional reforms in developing countries can help expand their product varieties in exports. Our model suggests that relaxing ownership restrictions on foreign direct investment, improving contract enforcement, and reducing offshoring cost can induce multinational companies to produce new products in host developing countries. Consistent with these theoretical predictions, we find empirical evidence that ownership liberalization, judicial quality and decline in offshoring costs played an important role in increasing the extensive margin of processing exports in China for the period of 1997–2007. •We model the effects of policy reforms in LDCs on export varieties.•The ownership liberalization of FDI in China provides a novel application.•We find that institutional reforms can help increase export varieties.
ISSN:0304-3878
1872-6089
DOI:10.1016/j.jdeveco.2015.08.009