Trade policy uncertainty, development strategy, and export behavior: Evidence from listed industrial companies in China

On the basis of new structural economics theory and heterogeneity of firm viability, this study analyzes the effect of trade policy uncertainty on firm export behavior using panel data of Chinese listed companies in the industrial sector. Empirical results show that the high uncertainty of trade policy significantly inhibits the extensive and intensive margins of firm export, while heteroge-neity effect occurs across firms with different levels of viability. The development strategy that violates comparative advantage strengthens the negative impact of trade policy uncertainty on firm export. Despite their correlation with viability, the type of ownership, total factor produc-tivity, and long-term loan are not suitable proxies for firm viability. Under high uncertainty of trade policy, export market diversification can alleviate the restraining effect of development strategy on firm export, whereas firms in regions with high industrial-oriented development tend to be vulnerable to cost shocks, thus reducing export market diversification. Findings present important implications for emerging market countries to enact better international trade and economic policies.

Automated summary

This study examines the impact of trade policy uncertainty on firm export behavior using panel data from Chinese listed companies in the industrial sector. The results indicate that high uncertainty in trade policy hinders firm export in terms of both the extensive and intensive margins, with variations observed across firms with different levels of viability. The findings suggest that a development strategy that goes against comparative advantage exacerbates the unfavorable effects of trade policy uncertainty on firm export.