Abstract
With the increase in labor costs in China and the tremendous changes in the international trade environment, upgrading the total factor productivity of Chinese furniture export enterprises faces a great challenge. Lots of studies have explored the interaction of exports or misallocation on the total factor productivity (TFP) of furniture enterprises, however, there is little knowledge on the impact and interaction of both exports and misallocation on the TFP. Based on panel data of Chinese furniture enterprises, this paper measures the TFP and the distortion of labor and capital resources in Chinese furniture enterprises. A two-way fixed-effects model is used to analyze the impact of exports and misallocation on the TFP of Chinese furniture enterprises. The paper reveals several important findings. First, the TFP of Chinese furniture export enterprises is lower than that of non-export enterprises, this phenomenon is called the “export–productivity paradox”. Chinese furniture export enterprises are processing trade-oriented and labor-intensive enterprises at the low end of the value chain, exports have a negative effect on improving the TFP of furniture enterprises in the short term. Second, the distortion of labor and capital resources in Chinese furniture enterprises promotes improvements to the TFP of furniture enterprises rather than reducing the TFP of furniture enterprises. Last but not the least, we find that misallocation has a positive moderating effect on exports and can weaken the negative impact of exports on TFP by the “forced mechanism”, which is that the higher the distortion of the misallocation, the higher the cost of acquiring capital and labor, and enterprises are forced to enhance their productivity when facing market competition, thus promoting improvements to the TFP of furniture enterprises.
Highlights
China is an important furniture producer and exporter
We found that the export behavior of furniture enterprises does not improve the total factor productivity (TFP) of furniture enterprises
As the Chinese furniture industry is mainly based on processing trade and labor-intensive enterprises, products are used for export, and the cost for export is low, so it is easy to enter foreign markets
Summary
China is an important furniture producer and exporter. In 2018, the total exports of the Chinese furniture industry totaled $53.685 billion, a year-on-year increase of 5.7%, with a high market share. The Chinese furniture industry has developed rapidly over the past 20 years, it has evolved from a traditional handicraft industry to an industrial automation production with advanced technology and equipment. Chinese furniture enterprises are still labor-intensive enterprises, and cheap labor is still the main source of their competitive advantage. As the laboring-age population turned to negative growth after 2010, and the labor prices continue to rise [1], the per capita wage of China’s manufacturing industry continues to grow at a high rate, and the growth rate has been maintained at more than 10%. In 2013, the per capita wage of China’s manufacturing industry was
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