IDEAS home Printed from https://ideas.repec.org/p/ags/aiea14/173106.html
   My bibliography  Save this paper

Estimating Food Quality from Trade Data: An Empirical Assessment

Author

Listed:
  • Curzi, Daniele
  • Pacca, Lucia

Abstract

Recent developments in international trade theory give growing emphasis to the quality of the exported products, showing that it affects both the direction of trade and the countries’ export performances. However, as quality is unobservable, a measurement problem clearly emerges. In this paper we measure product quality relying on a nested logit demand structure developed by Berry (1994) and then applied to trade data by Khandelwal (2010). Our main goal is to investigate the reliability and the properties of the estimated qualities, focusing on the EU food sector, where the growing attention on quality and safety issues is leading to an increase in the demand for high quality products. Main results give credence to the accuracy of the quality estimates, which display some interesting properties. Indeed, the quality rankings we draw are in line with the expectations, and quality growth proves to be strongly correlated with TFP growth. Moreover, results reveal that the competitive strategy of countries (high-quality vs. low-price) tends to change when moving from OECDs to non-OECDs. Finally, we provide evidence that the quality and price components of export unit values behave differently when testing their relationship with trade costs.

Suggested Citation

  • Curzi, Daniele & Pacca, Lucia, 2014. "Estimating Food Quality from Trade Data: An Empirical Assessment," 2014 Third Congress, June 25-27, 2014, Alghero, Italy 173106, Italian Association of Agricultural and Applied Economics (AIEAA).
  • Handle: RePEc:ags:aiea14:173106
    as

    Download full text from publisher

    File URL: http://purl.umn.edu/173106
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Lall, Sanjaya & Albaladejo, Manuel, 2004. "China's Competitive Performance: A Threat to East Asian Manufactured Exports?," World Development, Elsevier, vol. 32(9), pages 1441-1466, September.
    2. Julie A. Caswell & Eliza M. Mojduszka, 1996. "Using Informational Labeling to Influence the Market for Quality in Food Products," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(5), pages 1248-1253.
    3. Henson, Spencer & Masakure, Oliver & Cranfield, John, 2011. "Do Fresh Produce Exporters in Sub-Saharan Africa Benefit from GlobalGAP Certification?," World Development, Elsevier, vol. 39(3), pages 375-386, March.
    4. E. Baldwin, Richard & Ito, Tadashi, 2011. "Quality Competition Versus Price Competition Goods: An Empirical Classification," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 26, pages 110-135.
    5. Gene M. Grossman & Elhanan Helpman, 1991. "Quality Ladders in the Theory of Growth," Review of Economic Studies, Oxford University Press, vol. 58(1), pages 43-61.
    6. Curzi, Daniele & Raimondi, Valentina & Olper, Alessandro, 2013. "Quality Upgrading, Competition and Trade Policy: Evidence from the Agri-Food Sector," Proceedings Issues, 2013: Productivity and Its Impacts on Global Trade, June 2-4, 2013. Seville, Spain 152387, International Agricultural Trade Research Consortium.
    7. Matthieu Crozet & Keith Head & Thierry Mayer, 2012. "Quality Sorting and Trade: Firm-level Evidence for French Wine," Review of Economic Studies, Oxford University Press, vol. 79(2), pages 609-644.
    8. 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.
    9. Helpman, Elhanan, 2011. "Understanding Global Trade," Economics Books, Harvard University Press, number 9780674060784, December.
    10. Mary Amiti & Amit K. Khandelwal, 2013. "Import Competition and Quality Upgrading," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 476-490, May.
    11. Jun Ruan & Munisamy Gopinath, 2008. "Global productivity distribution and trade liberalisation: evidence from processed food industries," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 35(4), pages 439-460, December.
    12. Amit Khandelwal, 2010. "The Long and Short (of) Quality Ladders," Review of Economic Studies, Oxford University Press, vol. 77(4), pages 1450-1476.
    13. Olper, Alessandro & Pacca, Lucia & Curzi, Daniele, 2014. "Trade, import competition and productivity growth in the food industry," Food Policy, Elsevier, vol. 49(P1), pages 71-83.
    14. Olper, Alessandro & Curzi, Daniele & Pacca, Lucia, 2014. "Do food standards affect the quality of EU imports?," Economics Letters, Elsevier, vol. 122(2), pages 233-237.
    15. Hallak, Juan Carlos, 2006. "Product quality and the direction of trade," Journal of International Economics, Elsevier, vol. 68(1), pages 238-265, January.
    16. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    17. Colantone, Italo & Crinò, Rosario, 2014. "New imported inputs, new domestic products," Journal of International Economics, Elsevier, vol. 92(1), pages 147-165.
    18. Juan Carlos Hallak, 2010. "A Product-Quality View of the Linder Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 92(3), pages 453-466, August.
    19. Harrigan, James, 1999. "Estimation of cross-country differences in industry production functions," Journal of International Economics, Elsevier, vol. 47(2), pages 267-293, April.
    20. Bronwyn H. Hall & Clint Cumminq & Elizabeth S. Laderman & Joy Mundy, 1988. "The R&D Master File Documentation," NBER Technical Working Papers 0072, National Bureau of Economic Research, Inc.
    21. Christian Bontemps & Thierry Magnac & Eric Maurin, 2012. "Set Identified Linear Models," Econometrica, Econometric Society, vol. 80(3), pages 1129-1155, May.
    22. Amit K. Khandelwal & Peter K. Schott & Shang-Jin Wei, 2013. "Trade Liberalization and Embedded Institutional Reform: Evidence from Chinese Exporters," American Economic Review, American Economic Association, vol. 103(6), pages 2169-2195, October.
    23. Maertens, Miet & Swinnen, Johan F.M., 2009. "Trade, Standards, and Poverty: Evidence from Senegal," World Development, Elsevier, vol. 37(1), pages 161-178, January.
    24. Liao, Chi-Hung, 2011. "Measuring quality in international trade," Economic Systems, Elsevier, vol. 35(1), pages 125-138, March.
    25. Gaulier, Guillaume & Zignago, Soledad, 2004. "Notes on BACI (analytical database of international trade). 1989-2002 version," MPRA Paper 32401, University Library of Munich, Germany.
    26. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
    27. Crego, Al & Larson, Donald & Butzer, Rita & Mundlak, Yair, 1998. "A new database on investment and capital for agriculture and manufacturing," Policy Research Working Paper Series 2013, The World Bank.
    28. J. Peter Neary, 2009. "Putting the "New" into New Trade Theory: Paul Krugman's Nobel Memorial Prize in Economics," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(2), pages 217-250, June.
    29. Pablo Fajgelbaum & Gene M. Grossman & Elhanan Helpman, 2011. "Income Distribution, Product Quality, and International Trade," Journal of Political Economy, University of Chicago Press, vol. 119(4), pages 721-765.
    30. Klaus G. Grunert, 2005. "Food quality and safety: consumer perception and demand," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 32(3), pages 369-391, September.
    31. Michael M. Knetter, 1997. "The Segmentation of International Markets: Evidence from The Economist," NBER Working Papers 5878, National Bureau of Economic Research, Inc.
    32. Richard Baldwin & James Harrigan, 2011. "Zeros, Quality, and Space: Trade Theory and Trade Evidence," American Economic Journal: Microeconomics, American Economic Association, vol. 3(2), pages 60-88, May.
    33. Lan Liu & Chengyan Yue, 2012. "Investigating the impact of SPS standards on trade using a VES model," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 39(3), pages 511-528, July.
    34. Kym Anderson, 2010. "The New World in Globalizing Wine Markets: Lessons from Australia," Wine Economics Research Centre Working Papers 2010-09, University of Adelaide, Wine Economics Research Centre.
    35. Bertoletti, Paolo & Epifani, Paolo, 2014. "Monopolistic competition: CES redux?," Journal of International Economics, Elsevier, vol. 93(2), pages 227-238.
    36. Jouanjean, Marie-Agnès, 2012. "Standards, reputation, and trade: evidence from US horticultural import refusals," World Trade Review, Cambridge University Press, vol. 11(03), pages 438-461, July.
    37. Lipsey, Robert E., 1994. "Quality change and other influences on measures of export prices of manufactured goods," Policy Research Working Paper Series 1348, The World Bank.
    38. Flam, Harry & Helpman, Elhanan, 1987. "Vertical Product Differentiation and North-South Trade," American Economic Review, American Economic Association, vol. 77(5), pages 810-822, December.
    39. Ricardo Hausmann & Jason Hwang & Dani Rodrik, 2007. "What you export matters," Journal of Economic Growth, Springer, vol. 12(1), pages 1-25, March.
    40. Kym Anderson & David Norman & Glyn Wittwer, 2003. "Globalisation of the World's Wine Markets," The World Economy, Wiley Blackwell, vol. 26(5), pages 659-687, May.
    41. Krishna, Pravin & F. Maloney, William, 2011. "Export quality dynamics," Policy Research Working Paper Series 5701, The World Bank.
    42. Asier Minondo, 2010. "Exports' quality-adjusted productivity and economic growth," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 19(2), pages 257-287.
    43. Aiginger, Karl, 1997. "The Use of Unit Values to Discriminate between Price and Quality Competition," Cambridge Journal of Economics, Oxford University Press, vol. 21(5), pages 571-592, September.
    44. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
    45. Karl Aiginger, 2001. "Measuring the Intensity of Quality Competition in Industries," Austrian Economic Quarterly, WIFO, vol. 6(2), pages 73-101, May.
    46. Curzi, Daniele & Olper, Alessandro, 2012. "Export behavior of Italian food firms: Does product quality matter?," Food Policy, Elsevier, vol. 37(5), pages 493-503.
    47. 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.
    48. Alexandre Gohin & Fabienne Féménia, 2009. "Estimating Price Elasticities of Food Trade Functions: How Relevant is the CES-based Gravity Approach?," Journal of Agricultural Economics, Wiley Blackwell, vol. 60(2), pages 253-272.
    49. David Hummels & Peter J. Klenow, 2005. "The Variety and Quality of a Nation's Exports," American Economic Review, American Economic Association, vol. 95(3), pages 704-723, June.
    50. Peter K. Schott, 2004. "Across-Product Versus Within-Product Specialization in International Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 119(2), pages 647-678.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Quality estimates; Nested logit; Food products; International trade.; International Relations/Trade; Research Methods/ Statistical Methods; C23; F14; L15; Q17;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aiea14:173106. 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: (AgEcon Search). General contact details of provider: http://edirc.repec.org/data/aieaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.