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Quality Upgrading and its Welfare Cost in U.S. Steel Imports, 1969-74


  • Randi Boorstein
  • Robert C. Feenstra


In this paper we measure the quality change which has occurred in U.S. steel imports during the 1969-74 VRA, using an index number method. Under this approach, the yearly changes in unit values is broken into three components: a quality-adjusted or pure price index; a quality index, which measures changes in the product mix; and a supplier index, which measures changes in the source of supply. We also derive a measure of welfare cost, which equals the inverse of a Paasche price index minus the inverse of an exact price index. Over the 1969-74 VRA period we find quality upgrading of 7.4 percent in U.S. steel imports, which occurs most strongly in the first year. The welfare cost of quality change varies around one percent of import expenditure during 1970-73. This cost is at least as large as the conventional deadweight loss triangle, but smaller than the transfer of quota rents.

Suggested Citation

  • 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.
  • Handle: RePEc:nbr:nberwo:2452
    Note: ITI IFM

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    References listed on IDEAS

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    3. Robert C. Feenstra, 1988. "Quality Change Under Trade Restraints in Japanese Autos," The Quarterly Journal of Economics, Oxford University Press, vol. 103(1), pages 131-146.
    4. Analysis, A Welfare & Das, Satya P. & Donnenfeld, Shabtai, 1987. "Trade policy and its impact on quality of imports," Journal of International Economics, Elsevier, vol. 23(1-2), pages 77-95, August.
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    6. Krishna, Kala, 1990. "Protection and the Product Line: Monopoly and Product Quality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(1), pages 87-102, February.
    7. Feenstra, Robert C., 1985. "Automobile prices and protection: The U.S.-Japan trade restraint," Journal of Policy Modeling, Elsevier, vol. 7(1), pages 49-68.
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    9. James E. Anderson, 1988. "The Relative Inefficiency of Quotas," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511789, January.
    10. Carlos Alfredo Rodriguez, 1979. "The Quality of Imports and the Differential Welfare Effects of Tariffs, Quotas, and Quality Controls as Protective Devices," Canadian Journal of Economics, Canadian Economics Association, vol. 12(3), pages 439-449, August.
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    12. Chinloy, Peter T, 1980. "Sources of Quality Change in Labor Input," American Economic Review, American Economic Association, vol. 70(1), pages 108-119, March.
    13. Falvey, Rodney E, 1979. "The Composition of Trade within Import-restricted Product Categories," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 1105-1114, October.
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    Cited by:

    1. Ramos, Maria Priscila & Bureau, Jean-Christophe & Salvatici, Luca, 2007. "Shipping the good beef out: EU trade liberalization to Mercosur exports," Working Papers 7215, TRADEAG - Agricultural Trade Agreements.
    2. Maria Cipollina & Luca Salvatici, 2008. "Measuring Protection: Mission Impossible?," Journal of Economic Surveys, Wiley Blackwell, vol. 22(3), pages 577-616, July.
    3. James E. Anderson & J. Peter Neary, 2003. "The Mercantilist Index of Trade Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 627-649, May.
    4. Martin, Julien & Mejean, Isabelle, 2014. "Low-wage country competition and the quality content of high-wage country exports," Journal of International Economics, Elsevier, vol. 93(1), pages 140-152.
    5. Ramos, Maria Priscila, 2007. "Politique Commerciale, Qualité et Environnement: une Application aux Négociations Commerciales entre l’Union Européenne et le Mercosur," MPRA Paper 12640, University Library of Munich, Germany.
    6. Lutz, Stefan H., 2002. "The Effects of Quotas on Vertical Intra-Industry Trade," ZEW Discussion Papers 02-61, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    7. 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.
    8. repec:kap:iaecre:v:11:y:2005:i:2:p:163-173 is not listed on IDEAS
    9. Robert C. Feenstra, 1993. "Measuring the Welfare Effect of Quality Change: Theory and Application of Japanese Autos," NBER Working Papers 4401, National Bureau of Economic Research, Inc.
    10. Gabor Pula & Daniel Santabárbara, 2012. "Is china climbing up the quality ladder?," Working Papers 1209, Banco de España;Working Papers Homepage.
    11. Katherine M. Sauer, 2008. "The quality of parallel imports," Economics Bulletin, AccessEcon, vol. 6(44), pages 1-10.
    12. repec:ebl:ecbull:v:6:y:2008:i:44:p:1-10 is not listed on IDEAS

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