Trade Liberalization, Quality, and Export Prices / Haichao Fan, Yao Amber Li, Stephen R. Yeaple.

Format:

Book

Author/Creator:

Fan, Haichao.

Contributor:

National Bureau of Economic Research.

Li, Yao Amber.

Yeaple, Stephen R.

Series:

Working Paper Series (National Bureau of Economic Research) no. w20323.

NBER working paper series no. w20323

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2014.

Summary:

This paper presents theory and evidence from highly disaggregated Chinese data that tariff reductions induce a country's producers to upgrade the quality of the goods that they export. The paper first documents two stylized facts regarding the effect of trade liberalization on export prices and its relation with product differentiation. Next, the paper develops a simple analytic framework that relates a firm's choice of quality to its access to imported intermediates. The model predicts that a reduction in the import tariff induces an incumbent importer/exporter to increase the quality of its exports and to raise its export price in industries where the scope for quality differentiation is large while to lower its export price in industries where the scope for quality differentiation is small. The predictions are consistent with the stylized facts based on Chinese data and robust to various estimation specifications.

Notes:

Print version record

July 2014.