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Low-Wage Countries' Competition, Reallocation Across Firms and the Quality Content of Exports

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  • Martin, Julien
  • Méjean, Isabelle

Abstract

What is the impact of low-wage countries' competition on the quality of high-wage countries' exports? To answer this question, we develop a new method that uses firm-level data to measure quality changes in sectoral exports. Over 1995-2005, we measure a 11% increase in the mean quality of France's aggregate exports, driven by a reallocation of demand in favor of higher quality producers. The phenomenon is significantly more pronounced in markets where the penetration of developing countries has increased while it is negative where firms face increased competitive pressures from high-wage countries. These results are consistent with within-product specialization along the vertical dimension. They suggest that, over the period, France has specialized in the production of higher quality goods. In our data, around one fifth of the measured quality improvement in France's aggregate exports is attributable to low-wage countries' competition. In turn, its increasing specialization in higher quality goods has limited France's market share loss over the period.

Suggested Citation

  • Martin, Julien & Méjean, Isabelle, 2011. "Low-Wage Countries' Competition, Reallocation Across Firms and the Quality Content of Exports," CEPR Discussion Papers 8231, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:8231
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    Cited by:

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    2. Franco Amatori & Matteo Bugamelli & Andrea Colli, 2011. "Italian Firms in History: Size, Technology and Entrepreneurship," Quaderni di storia economica (Economic History Working Papers) 13, Bank of Italy, Economic Research and International Relations Area.
    3. Gaulier, Guillaume & Santoni, Gianluca & Taglioni, Daria & Zignago, Soledad, 2013. "In the wake of the global crisis : evidence from a new quarterly database of export competitiveness," Policy Research Working Paper Series 6733, The World Bank.
    4. Giorgia Giovannetti & Marco Sanfilippo, 2016. "China’s competition and the export price strategies of developed countries," International Review of Applied Economics, Taylor & Francis Journals, vol. 30(2), pages 238-254, March.
    5. Bas, Maria & Strauss-Kahn, Vanessa, 2015. "Input-trade liberalization, export prices and quality upgrading," Journal of International Economics, Elsevier, vol. 95(2), pages 250-262.
    6. Auer, Raphael A. & Degen, Kathrin & Fischer, Andreas M., 2013. "Low-wage import competition, inflationary pressure, and industry dynamics in Europe," European Economic Review, Elsevier, vol. 59(C), pages 141-166.
    7. Castellares, Renzo, 2015. "Competition and Quality Upgrading in Export Markets: The case of Peruvian Apparel Exports," Working Papers 2015-010, Banco Central de Reserva del Perú.
    8. Jürgen Janger & Werner Hölzl & Serguei Kaniovski & Johannes Kutsam & Michael Peneder & Andreas Reinstaller & Susanne Sieber & Isabel Stadler & Fabian Unterlass, 2011. "Structural Change and the Competitiveness of EU Member States," WIFO Studies, WIFO, number 42956, January.
    9. Matteo Bugamelli & Silvia Fabiani & Enrico Sette, 2015. "The Age of the Dragon: The Effect of Imports from China on Firm‐Level Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(6), pages 1091-1118, September.
    10. Martin, Julien & Mayneris, Florian, 2015. "High-end variety exporters defying gravity: Micro facts and aggregate implications," Journal of International Economics, Elsevier, vol. 96(1), pages 55-71.

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    More about this item

    Keywords

    Firm-Level Data; Low-Wage Countries' Competition; Quality Heterogeneity; Within-product specialization;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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