Digital product imports and export product quality: Firm-level evidence from China

Based on the Statistical Classification of the Digital Economy and Its Core Industries (2021) released by the National Bureau of Statistics of China and the information and communications technology products released by the United Nations Conference on Trade and Development to construct a digital product catalog manually, this paper analyzes the impact of digital product imports on Chinese firms' export product quality using a combined data set of the Annual Survey of Industrial Production and China Custom Records from 2000 to 2013. The results show that digital product imports have a significant positive effect on a firm's export product quality. To address potential endogeneity, this paper uses a series of instrumental variables (IVs) and constructs a multi-timing difference-in-differences model using the firm's first digital product import as exogenous shock, and finds strong supporting evidence. Digital product imports improve the quality of export products through three mechanisms: technology spillovers, productivity, and information-searching capabilities. Heterogeneity analysis reveals that digital product imports have greater impacts on foreign-owned and capital-intensive firms, and digital intermediate imports play a bigger role than do digital non-intermediate imports. The results of this paper have important implications for developing countries that wish to improve the quality of exports through digital trade.