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Does trade stimulate product quality upgrading?

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  • 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 firm‐product 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. Est‐ce que le commerce international stimule l'amélioration de la qualité des produits? Ce texte explore la question à savoir si l'accroissement de la concurrence engendré par les importations entraîne les entreprises à s'engager dans un processus d'innovation incrémentale qui se reflète dans une amélioration de la qualité des produits. Les auteurs utilisent des données au niveau de la firme pour le secteur manufacturier au Chili et mesurent la qualité du produit à l'aide des valeurs unitaires (prix). On identifie les effets de causalité de la concurrence par l'importation à l'aide d'une mesure de la barrière effective au commerce – les coûts de transport – comme instrument pour calibrer les ratios de pénétration des importations dans le marché domestique. Les coûts de transport ont un effet négatif et significatif sur la qualité des produits. Les résultats suggèrent que l'accroissement de la valeur unitaire estimée prend la mesure de l'accroissement de la qualité du produit, que la concurrence des importations entraîne une amélioration de la qualité des produits, et que les avantages dépendent de la spécialisation industrielle des entreprises. Un accès plus facile aux intrants intermédiaires stimule aussi l'amélioration de la qualité.

Suggested Citation

  • Ana M. Fernandes & Caroline Paunov, 2013. "Does trade stimulate product quality upgrading?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 46(4), pages 1232-1264, November.
  • Handle: RePEc:wly:canjec: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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