Measuring quality in international trade
Product quality plays a vital role in international trade flows, but the measurement of quality remains to be a challenge because true quality is usually unobserved in trade data. In this study, we propose a straightforward measurement of quality--the weighted-income index--and compare it with the unit-value proxy in a microeconomic model with quality choice. Then we compare the two measurements in the automobile industry. The empirical result shows that the weighted-income quality index performs better than the unit-value quality proxy in ranking true quality.
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Volume (Year): 35 (2011)
Issue (Month): 1 (March)
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