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Moving up the Quality ladder? EU-China Trade Dynamics in Clothing

Author

Listed:
  • Hylke Vandenbussche
  • Francesco Di Comite
  • Laura Rovegno
  • Christian Viegelahn

Abstract

We apply a simple method to study the relative quality of Chinese versus European products exported in the clothing sector after the end of the Multi-Fiber Arrangement. Based on the model of Foster et al (2008), we interpret the relative change of export prices and quantities sold in narrowly defined product categories as an indicator of quality shifts. Using UN Comtrade data we find that European varieties exported to the US typically sell for a higher price than identical Chinese varieties exported to the US, but this price gap is narrowing. Despite rising prices, Chinese varieties are gaining market share. This opposite movement of relative prices and quantities sold in the same destination market, are a strong indication of China moving up the quality ladder in its clothing exports relative to the EU. While European “core” products in clothing are stable over time, Chinese exports show strong product dynamics with exit and entry of new “core” products every year and “core” products changing rapidly. Both China and the EU export in every product category, resulting in an almost perfect product overlap with almost no products being exported by only one of the two.

Suggested Citation

  • Hylke Vandenbussche & Francesco Di Comite & Laura Rovegno & Christian Viegelahn, 2011. "Moving up the Quality ladder? EU-China Trade Dynamics in Clothing," LICOS Discussion Papers 30111, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  • Handle: RePEc:lic:licosd:30111
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    File URL: http://www.econ.kuleuven.be/licos/publications/dp/dp301.pdf
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    References listed on IDEAS

    as
    1. Francesco Di Comite & Jacques-François Thisse & Hylke Vandenbussche, 2011. "Verti-zontal Differentiation in Monopolistic Competition," Development Working Papers 322, Centro Studi Luca d'Agliano, University of Milano, revised 17 Oct 2011.
    2. Francois, Joseph & Woerz, Julia, 2009. "Non-linear panel estimation of import quotas: The evolution of quota premiums under the ATC," Journal of International Economics, Elsevier, vol. 78(2), pages 181-191, July.
    3. 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.
    4. 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.
    5. Peter K. Schott, 2008. "The relative sophistication of Chinese exports," Economic Policy, CEPR;CES;MSH, vol. 23, pages 5-49, January.
    6. Marc J. Melitz & Gianmarco I. P. Ottaviano, 2008. "Market Size, Trade, and Productivity," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 295-316.
    7. Finger, J M & Kreinin, M E, 1979. "A Measure of 'Export Similarity' and Its Possible Uses," Economic Journal, Royal Economic Society, vol. 89(356), pages 905-912, December.
    8. Pablo D. Fajgelbaum, 2011. "Income Distribution, Product Quality and International Trade," 2011 Meeting Papers 415, Society for Economic Dynamics.
    9. Carolyn Evans & James Harrigan, 2005. "Tight Clothing. How the MFA Affects Asian Apparel Exports," NBER Chapters,in: International Trade in East Asia, NBER-East Asia Seminar on Economics, Volume 14, pages 367-390 National Bureau of Economic Research, Inc.
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    Cited by:

    1. Sandrina Moreira & Nádia Simões & Nuno Crespo, 2015. "A contribution to a multidimensional analysis of trade competition," Working Papers Series 2 15-01, ISCTE-IUL, Business Research Unit (BRU-IUL).
    2. 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.

    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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