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... exporters. Third, our paper contributes to the extensive literature on the productivity effects of exporting. Previous studies hypothesize that exporters can learn from foreign buyers about product designs and advanced production technology (World Bank, 1993; De Loecker, 2007). Firm-level empirical studies find mixed results for this learning-byexporting hypothesis (e.g., Clerides et al., 1998; Bernard and Jensen, 1999; Van Biesebroeck, 2005; De Loecker, 2007).5 Specific to China, Kraay (1999) finds that exporters are more productive than nonexporters based on survey data of over 2000 firms. Park et al. (2010) use exposure to the 1997 Asian financial crisis as an instrument and find that Chinese firms that export to developed countries experienceto exporting. They find that exporters have higher productivity than non-exporters before exporting but not after. Other studies findmore positive results. A more recent study by a group of economists (International Study Group on Exports and Productivity, 2008) uses comparable firmpanel data for 14 countries and an identicalmethod to investigate the relationship between exports and productivity. They find strong evidence for self-selection but no evidence ...

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...gains generated by entry into foreign markets, however (early works include Bernard and Jensen, 1999 or Bernard and Wagner, 1998; for recent contributions see De Loecker, 2007, Van Biesebroeck, 2005, =-=Park et al., 2009-=-). These results have led many authors to argue that trade liberalization may affect economic growth mainly through the process of resource reallocation across firms within sector, with little contrib...

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... Appendix 2 for details on how exactly we calculate TFP. 15 is defined as the lagged ratio of tangible fixed assets to total assets. Firms with higher asset tangibility are more likely to operate in less dynamic industries with lower growth potential (Hovakimian, 2009). We therefore expect to observe a positive relationship between asset tangibility and divestment. We use an export dummy to capture the expected performance-enhancing effects of export activities among Chinese firms. Consistent with widespread evidence that efficiency and exports are positively correlated in China (Kraay, 1999; Park et al., 2010), we expect that firms conducting export business are more likely not to divest or to divest less. Lastly, we include time dummies to account for macroeconomic fluctuations or business cycle effects ( ), industry dummies to capture industry-specific effects ( ), and the interactions of time and industry dummies to account for industry-specific shifts in investment demand or expectations ( ) 8 . 5.2 Estimation methodology We first estimate a random-effects probit model to examine the factors that determine the probability of negative investment for each ownership group. We then use a random-eff...