Trade barrier and misallocations: The case of the photovoltaic manufacturing industry in China

We measure resource misallocations among Chinese photovoltaic (PV) exporters before and after the EU imposed antidumping duties (ADs) and countervailing duties (CVDs) in 2011.We find that improvements in total factor productivity can be attributed to improvements in the production efficiency of state-owned enterprises (SOEs) and the convergent returns of labor and capital inputs between SOEs and non-state-owned enterprises (NSOEs) after 2011. Surprisingly, our results indicate that improvements in extensive-margin misallocations due to exiting zombie SOEs do not contribute substantially to improving industry-level production efficiency, and we conclude that reallocating inputs among existing firms is more important.