ARTICLE | Journal of International Economics | Vol. 140, 2023

Abstract

We built a multi-sector spatial general equilibrium model, featuring heterogeneous firms’ and workers’ location choices, to account for China’s export surge between 1990 and 2005 from three policy changes: China’s import tariffs, tariffs imposed against China’s exports, and barriers to internal migration in China. We found that tariff and migration policies jointly accounted for 30% of China’s export growth. We also found a positive spillover effect of tariff and migration policies, which arose entirely from processing export growth. As migration reform prepared the country to become more export oriented, China enjoyed a faster export growth from opening up trade than if it had done otherwise. This spillover effect of tariff and migration policies would have been overlooked if tariff and migration had been analyzed separately, or if processing and ordinary exports had not been distinguished in the model.