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Competition and Quality Upgrading in Export Markets: The case of Peruvian Apparel Exports

Author

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  • Castellares, Renzo

    (Banco Central de Reserva del Perú)

Abstract

This paper uses the exponential growth in Chinese exports from 2001 to 2006 to evaluate the effects of a competition shock from a low-wage competitor on exporters from a developing country. In particular, this research considers heterogeneous quality upgrading strategies of Peruvian apparel firms in response to an influx of low-cost Chinese apparel goods. Using firm-level data from Peruvian customs and a survey of Peruvian manufactures, I find that more productive firms upgrade their product quality to differentiate them from low-cost and low-quality Chinese apparel goods. Conversely, less productive Peruvian firms, which are not able to increase their quality, react by reducing their prices. Finally, I also find evidence that the average quality of Peruvian apparel products increase during 2001 to 2007.

Suggested Citation

  • Castellares, Renzo, 2015. "Competition and Quality Upgrading in Export Markets: The case of Peruvian Apparel Exports," Working Papers 2015-010, Banco Central de Reserva del Perú.
    • Handle: RePEc:rbp:wpaper:2015-010
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    References listed on IDEAS

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    More about this item

    Keywords

    Trade; competition; quality; trade finance;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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