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Quality and the Great Trade Collapse

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  • Chen, Natalie
  • Juvenal, Luciana

Abstract

We explore whether the global financial crisis has had heterogeneous effects on traded goods differentiated by quality. Combining a dataset of Argentinean firm-level destination-specific wine exports with quality ratings, we show that higher quality exports grew faster before the crisis, but this trend reversed during the recession. Quantitatively, the effect is large: up to nine percentage points difference in trade performance can be explained by the quality composition of exports. This flight from quality was triggered by a fall in aggregate demand, was more acute when households could substitute imports by domestic alternatives, and was stronger for smaller firms' exports.

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  • Chen, Natalie & Juvenal, Luciana, 2015. "Quality and the Great Trade Collapse," CEPR Discussion Papers 10931, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:10931
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    Cited by:

    1. Paulo Bastos & Joana Silva & Eric Verhoogen, 2018. "Export Destinations and Input Prices," American Economic Review, American Economic Association, vol. 108(2), pages 353-392, February.
    2. Di Ubaldo, Mattia, 2016. "Firms and trade in downturns," Economics PhD Theses 0416, Department of Economics, University of Sussex Business School.
    3. Chen, Natalie & Juvenal, Luciana, 2019. "Markups, Quality, and Trade Costs," The Warwick Economics Research Paper Series (TWERPS) 1233, University of Warwick, Department of Economics.
    4. A. M. M. Shahiduzzaman Quoreshi & Trudy-Ann Stone, 2019. "Do Global Value Chains Make Firms More Vulnerable to Trade Shocks?—Evidence from Manufacturing Firms in Sweden," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 12(3), pages 1-16, September.
    5. Chen, Natalie & Juvenal, Luciana, 2019. "Markups, Quality, and Trade Costs," CAGE Online Working Paper Series 446, Competitive Advantage in the Global Economy (CAGE).
    6. Jaimovich, Nir & Rebelo, Sergio & Wong, Arlene, 2019. "Trading down and the business cycle," Journal of Monetary Economics, Elsevier, vol. 102(C), pages 96-121.
    7. Mattia Di Ubaldo, 2015. "Product Cost-Share: a Catalyst of the Trade Collapse," Working Paper Series 8015, Department of Economics, University of Sussex Business School.

    More about this item

    Keywords

    Exports; Heterogeneity; Multi-product firms; Quality; Trade collapse; Unit values; Wine;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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