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Does trade stimulate product quality upgrading?

Author

Listed:
  • Ana M. Fernandes
  • Caroline Paunov

Abstract

This paper investigates whether increased import competition leads firms to engage in incremental innovation reflected in product quality upgrading using Chilean manufacturing firmproduct data and measuring product quality with unit values (prices). We identify causal effects of import competition using an effective trade barrier measure transport costs as instruments for import penetration ratios across industries. Transport costs have a negative and significant effect on product quality. The evidence suggests that estimated unit value increases capture product quality upgrading, imports competition effects drive quality upgrading, and benefits depend on firms industrial specialization. Easier access to intermediate inputs also fosters quality upgrading.

Suggested Citation

  • Ana M. Fernandes & Caroline Paunov, 2013. "Does trade stimulate product quality upgrading?," Canadian Journal of Economics, Canadian Economics Association, vol. 46(4), pages 1232-1264, November.
  • Handle: RePEc:cje:issued:v:46:y:2013:i:4:p:1232-1264
    DOI: 10.1111/caje.12047
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    More about this item

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L6 - Industrial Organization - - Industry Studies: Manufacturing

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