Trade, Skills, and Quality Upgrading: A Theory with Evidence from Colombia / Ana Cecília Fieler, Marcela Eslava, Daniel Xu.

Format:

Book

Author/Creator:

Fieler, Ana Cecília.

Contributor:

National Bureau of Economic Research.

Eslava, Marcela.

Xu, Daniel.

Series:

Working Paper Series (National Bureau of Economic Research) no. w19992.

NBER working paper series no. w19992

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Trade, Skills, and Quality Upgrading

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2014.

Summary:

We develop a model of international trade with heterogeneous firms and endogenous quality choices. Producing higher quality involves returns to scale, it is intensive in skilled labor and high-quality inputs. Firms' quality choices are interrelated because firms sell their goods to consumers and to other firms. We estimate the model using data on manufacturing plants in Colombia before the trade liberalization, simulate a counterfactual liberalization and compare the results to post-liberalization data. Like other unilateral trade liberalizations in developing countries, the skill premium and skill intensity in manufacturing increased, and the size of firms decreased in Colombia. In the model, lower tariffs lead importers and exporters to upgrade quality, increasing the domestic demand and supply of high-quality inputs. Other firms then upgrade their own product quality, thereby amplifying these effects of domestic inputs. Relative demand for skilled labor increases in a wide range of firms, despite a contraction in sales.

Notes:

Print version record

March 2014.