Technological catching up, quality of exports and competitiveness: a sectoral perspective
In the paper we focus on emerging market economiesâ€™ pattern of trade, with a view to explaining the different features of competitiveness for high skill- and low skill-intensive firms. We consider a theoretical dynamical setup where high-skill firms engage in innovation activity and gain market shares in high-income â€quality dominatedâ€ markets thanks to technological catching up, whereas low-skill firms face price competition for their exports. On the basis of the theoretical model, we run econometric estimations for trade between CEECs and EU economies over the period 2000-2007. In the econometric analysis we first test the assumption that UVR is an adequate indicator of quality in trade, showing that in high skill-intensive firms it is systematically correlated to domestic and foreign technological variables; we then use the fitted UVR in the estimation of the role of preference for quality in the evolution of CEECsâ€™ market shares. The estimations support the results of the theoretical model as to the role of non-price competitiveness stemming from quality-supply as well as quality-demand factors.
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