Does the Division of Domestic Value Chains Affect the Export Binary Margin

Abstract

This study examines the potential heterogeneous effects of domestic value chains (DVCs) on two different paths of export expansion, namely the intensive margin and the extensive margin. Using panel data of 195 prefecture-level cities in China spanning from 2000 to 2013, this paper explores the association between DVCs and export binary margin. The results indicate that DVCs exhibit a significant positive U-shaped relationship with the export intensive margin, while it has a linear positive effect on the export extensive margin. Additionally, market integration and market competition emerge as important mechanisms through which DVCs influence the city’s export binary margin. In addition, the study suggests that central and western regions' integration into DVCs more strongly promotes local export expansion compared to eastern regions. Overall, the empirical evidence presented in this paper contributes to enhancing the understanding of the development pattern of DVCs in China from the perspective of trade competitiveness.