Offshoring and Patterns of Quality Growth: Evidence from Danish Apparel
Recently a small empirical literature has taken off attempting to analyze the role that quality plays in our understanding of trade. In particular, the recent work of Khandelwal (2010) has brought the insights of structural IO models of demand to bear into trade data. Our work builds on this new structural literature; we use similar demand estimation techniques on a panel of Danish apparel firms from 1997 to 2010 in order to analyze how firms responded to China’s entry to the WTO and the dismantling of the Multi-Fibre Agreement. We find substantial changes in the aggregate level as the distribution of quality tightens up and import competition appears to spur entry of higher quality firms and exit of lower quality producers. The reduction in trade costs leads to a massive increase in offshoring. The association of offshoring and quality depends on the quality of the sourcing country – while offshoring is generally associated with higher quality, offshoring to China is not. The reductions in trade costs also lead to changes in the distribution of prices and quality-adjusted prices. This has implications for policy as understanding the distribution of prices faced by heterogeneous consumers is key to understand how trade affects consumers along the income distribution.
|Date of creation:||19 Nov 2013|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.econ.au.dk/afn/|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sutton, John, 2012. "Competing in Capabilities: The Globalization Process," OUP Catalogue, Oxford University Press, number 9780199274536, December.
- Amit Khandelwal, 2010.
"The Long and Short (of) Quality Ladders,"
Review of Economic Studies,
Oxford University Press, vol. 77(4), pages 1450-1476.
- Maurice Kugler & Eric Verhoogen, 2012.
"Prices, Plant Size, and Product Quality,"
Review of Economic Studies,
Oxford University Press, vol. 79(1), pages 307-339.
- Kugler, Maurice & Verhoogen, Eric A, 2009. "The Quality-Complementarity Hypothesis: Theory and Evidence from Colombia," CEPR Discussion Papers 7119, C.E.P.R. Discussion Papers.
- Kugler, M., Verhoogen, E.A., 2008. "Product Quality at the Plant Level: Plant Size, Exports, Output Prices and Input Prices in Colombia," Working Papers eg0058, Wilfrid Laurier University, Department of Economics, revised Feb 2008.
- Kugler, Maurice & Verhoogen, Eric, 2009. "The Quality-Complementarity Hypothesis: Theory and Evidence from Colombia," IZA Discussion Papers 3932, Institute for the Study of Labor (IZA).
- Maurice Kugler & Eric Verhoogen, 2008. "The Quality-Complementarity Hypothesis: Theory and Evidence from Colombia," NBER Working Papers 14418, National Bureau of Economic Research, Inc.
- Andrew Caplin & Barry Nalebuff, 1990.
"Aggregation and Imperfect Competition: On the Existence of Equilibrium,"
Cowles Foundation Discussion Papers
937, Cowles Foundation for Research in Economics, Yale University.
- Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Econometrica, Econometric Society, vol. 59(1), pages 25-59, January.
- Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
- Juan Carlos Hallak & Peter K. Schott, 2008.
"Estimating Cross-Country Differences in Product Quality,"
NBER Working Papers
13807, National Bureau of Economic Research, Inc.
- Juan Carlos Hallak & Peter K. Schott, 2011. "Estimating Cross-Country Differences in Product Quality," The Quarterly Journal of Economics, Oxford University Press, vol. 126(1), pages 417-474.
- John Sutton, 2001. "Technology and Market Structure: Theory and History," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262692643, March.
- Gene M. Grossman & Esteban Rossi-Hansberg, 2008.
"Trading Tasks: A Simple Theory of Offshoring,"
American Economic Review,
American Economic Association, vol. 98(5), pages 1978-97, December.
- Irene Brambilla & Amit Khandelwal & Peter Schott, 2007.
"China's Experience Under the Multifiber Arrangement (MFA) and the Agreement on Textiles and Clothing (ATC),"
NBER Working Papers
13346, National Bureau of Economic Research, Inc.
- Irene Brambilla & Amit K. Khandelwal & Peter K. Schott, 2010. "China's Experience under the Multi-Fiber Arrangement (MFA) and the Agreement on Textiles and Clothing (ATC)," NBER Chapters, in: China's Growing Role in World Trade, pages 345-387 National Bureau of Economic Research, Inc.
- Maurice Kugler & Eric Verhoogen, 2009. "Plants and Imported Inputs: New Facts and an Interpretation," American Economic Review, American Economic Association, vol. 99(2), pages 501-07, May.
- Ackerberg, Daniel & Caves, Kevin & Frazer, Garth, 2006. "Structural identification of production functions," MPRA Paper 38349, University Library of Munich, Germany.
- Daniel Yi Xu & Ana Cecilia Fieler & Marcela Eslava, 2012. "Trade, competition and quality-upgrading: A theory with evidence from Colombia," 2012 Meeting Papers 471, Society for Economic Dynamics.
- Eric A. Verhoogen, 2008. "Trade, Quality Upgrading, and Wage Inequality in the Mexican Manufacturing Sector," The Quarterly Journal of Economics, Oxford University Press, vol. 123(2), pages 489-530.
- Mark J. Roberts & Daniel Yi Xu & Xiaoyan Fan & Shengxing Zhang, 2012. "The Role of Firm Factors in Demand, Cost, and Export Market Selection for Chinese Footwear Producers," NBER Working Papers 17725, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:aah:aarhec:2013-25. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.