Template-Type: ReDIF-Paper 1.0
Title: Diversification or Specialization? The Responses of Multi-Product Exporters to Quota Removal 
Author-Name: Ruxue Bai
Author-Email: bairxply@163.com
Author-Name: Lei Li
Author-Email: lei.li@uni-mannheim.de
Author-Name: Ying Li
Author-Email: yingliallen@163.com
Author-Name: Libo Yin
Author-Email: yinlibowsxbb@126.com

Classification-JEL:  F12, F13, F14
Keywords: Import quota, multi-product firms, cannibalization effect, diversification, demand linkages, supply linkages, exports, stock market

Abstract: This paper investigates how multi-product firms narrow their product scope and target
fewer export destinations in response to increased demand. Focusing on the effects of quota
removal, we show that an increase in demand for quota-bound products crowds out quota-free
products through cannibalization, and reduces exports to quota-free destinations through capacity constraint. 
Consistent with the theory, our findings reveal a 25% increase in product
concentration and a 2% increase in destination concentration among Chinese exporters after
the removal of externally imposed quotas on textile and clothing exports. The increasing
concentration is due to the export shifts from quota-free to quota-bound products and destinations. 
Subsequently, affected firms exhibit better capital market performances, with a 5%
higher abnormal return within the three-day event window.

Note: 
Length: 65
Creation-Date: 2024-04
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp533
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2024_533