Is china climbing up the quality ladder?
There is an ongoing debate in the literature about the quality content of Chinese exports and to what extent China poses a threat to the market positions of advanced economies. While China’s export structure is very similar to that of the advanced world, its export unit values are well below the level of developed economies. Building on the assumption that unit values reflect quality, the prevailing view of the literature is that China exports low quality varieties of the same products as its advanced competitors. This paper challenges this view by relaxing the assumption that unit values reflect quality. We derive the quality of Chinese exports to the European Union by estimating disaggregated demand functions from a discrete choice model. The paper has three major findings. First, China’s share of the European Union market is larger than would be justified only by its low average prices, implying that the quality of Chinese exports is high compared to many competitors. Second, China has gained quality relative to other competitors since 1995, indicating that China is climbing up the quality ladder. Finally, our analysis of the supply side determinants reveals that the relatively high quality of Chinese exports is related to processing trade and the increasing role of global production networks in China.
|Date of creation:||Feb 2012|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.bde.es/|
More information through EDIRC
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.:
- Lionel Fontagné & Guillaume Gaulier & Soledad Zignago, 2008.
"Specialization across varieties and North-South competition,"
CEPR;CES;MSH, vol. 23, pages 51-91, 01.
- Lionel Fontagné & Guillaume Gaulier & Soledad Zignago, 2008. "Specialization across varieties and North-South competition," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00270494, HAL.
- Lionel Fontagné & Guillaume Gaulier & Soledad Zignago, 2007. "Specialisation across Varieties within Products and North-South Competition," Working Papers 2007-06, CEPII research center.
- Pula, Gabor & Daniel Santabarbara, Daniel, 2012.
"Is China climbing up the quality ladder?,"
BOFIT Discussion Papers
23/2012, Bank of Finland, Institute for Economies in Transition.
- Gabor Pula & Daniel Santabárbara, 2012. "Is china climbing up the quality ladder?," Working Papers 1209, Banco de España;Working Papers Homepage.
- Pula, Gabor & Santabárbara, Daniel, 2011. "Is China climbing up the quality ladder? Estimating cross country differences in product quality using Eurostat's COMEXT trade database," Working Paper Series 1310, European Central Bank.
- repec:oup:qjecon:v:126:y:2011:i:1:p:417-474 is not listed on IDEAS
- Peter K. Schott, 2008.
"The relative sophistication of Chinese exports,"
CEPR;CES;MSH, vol. 23, pages 5-49, 01.
- Amit Khandelwal, 2009.
"The Long and Short (of) Quality Ladders,"
NBER Working Papers
15178, National Bureau of Economic Research, Inc.
- Barry Eichengreen & Yeongseop Rhee & Hui Tong, 2004. "The Impact of China on the Exports of Other Asian Countries," NBER Working Papers 10768, National Bureau of Economic Research, Inc.
- Rodrik, Dani, 2006.
"What's So Special About China's Exports?,"
CEPR Discussion Papers
5484, C.E.P.R. Discussion Papers.
- Ari Van Assche & Byron Gangnes, 2010.
"Electronics production upgrading: is China exceptional?,"
Applied Economics Letters,
Taylor & Francis Journals, vol. 17(5), pages 477-482.
- Ari Van Assche & Byron Gangnes, 2007. "Electronics Production Upgrading: Is China Exceptional?," CIRANO Working Papers 2007s-16, CIRANO.
- Ari Van Assche & Byron Gangnes, 2007. "Electronics Production Upgrading: Is China Exceptional?," Working Papers 200722, University of Hawaii at Manoa, Department of Economics.
- Xu, Bin, 2010. "Erratum to "The sophistication of exports: Is China special?" [China Economic Review 21 (3) (2010) 482-493]," China Economic Review, Elsevier, vol. 21(4), pages 671-672, December.
- 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 571-92, September.
- XU, Bin & LU, Jiangyong, 2009. "Foreign direct investment, processing trade, and the sophistication of China's exports," China Economic Review, Elsevier, vol. 20(3), pages 425-439, September.
- Aw, Bee Yan & Roberts, Mark J., 1986. "Measuring quality change in quota-constrained import markets: The Case of U.S. Footwear," Journal of International Economics, Elsevier, vol. 21(1-2), pages 45-60, August.
- David Roland Holst & John Weiss, 2004. "ASEAN and China: Export Rivals or Partners in Regional Growth?," The World Economy, Wiley Blackwell, vol. 27(8), pages 1255-1274, 08.
- Robert Koopman & William Powers & Zhi Wang & Shang-Jin Wei, 2010.
"Give Credit Where Credit Is Due: Tracing Value Added in Global Production Chains,"
NBER Working Papers
16426, National Bureau of Economic Research, Inc.
- Robert Koopman & William Powers & Zhi Wang & Shang-Jin Wei, 2011. "Give Credit where Credit is Due: Tracing Value Added in Global Production Chains," Working Papers 312011, Hong Kong Institute for Monetary Research.
- Randi Boorstein & Robert C. Feenstra, 1987. "Quality Upgrading and its Welfare Cost in U.S. Steel Imports, 1969-74," NBER Working Papers 2452, National Bureau of Economic Research, Inc.
- 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.
- Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-77, March.
- Konstantins Benkovskis & Ramune Rimgailaite, 2011.
"The quality and variety of exports from the new EU member states,"
The Economics of Transition,
The European Bank for Reconstruction and Development, vol. 19(4), pages 723-747, October.
- Konstantins Benkovskis & Ramune Rimgailaite, 2010. "The Quality and Variety of Exports from New EU Member States: Evidence from Very Disaggregated Data," Working Papers 2010/02, Latvijas Banka.
- Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
- Jane Haltmaier & Shaghil Ahmed & Brahima Coulibaly & Ross Knippenberg & Sylvain Leduc & Mario Marazzi & Beth Anne Wilson, 2007. "The role of China in Asia: engine, conduit, or steamroller?," International Finance Discussion Papers 904, Board of Governors of the Federal Reserve System (U.S.).
- Cardell, N. Scott, 1997. "Variance Components Structures for the Extreme-Value and Logistic Distributions with Application to Models of Heterogeneity," Econometric Theory, Cambridge University Press, vol. 13(02), pages 185-213, April.
- Juan Carlos Hallak & Peter K. Schott, 2008.
"Estimating Cross-Country Differences in Product Quality,"
NBER Working Papers
13807, National Bureau of Economic Research, Inc.
- Kai Guo & Papa N'Diaye, 2009. "Is China's Export-Oriented Growth Sustainable?," IMF Working Papers 09/172, International Monetary Fund.
- Xu, Bin, 2010. "The sophistication of exports: Is China special?," China Economic Review, Elsevier, vol. 21(3), pages 482-493, September.
- Ursel Baumann & Filippo di Mauro, 2007. "Globalisation and euro area trade: Interactions and challenges," Occasional Paper Series 55, European Central Bank.
When requesting a correction, please mention this item's handle: RePEc:bde:wpaper:1209. 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: (María Beiro. Electronic Dissemination of Information Unit. Research Department. Banco de España)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.