Trade Liberalization, Quality, and Export Prices
Yao Li () and
MPRA Paper from University Library of Munich, Germany
This paper presents theory and evidence from highly disaggregated Chinese data that tariff reductions induce a country's producers to upgrade the quality of the goods that they export. The paper first documents two stylized facts regarding the effect of trade liberalization on export prices and its relation with product differentiation. Next, the paper extends Melitz's (2003) model of trade with heterogeneous firms by introducing endogenous quality choice. The model predicts that a reduction in the import tariff induces an incumbent importer/exporter to increase the quality of its exports and to raise its export price in industries where the scope for quality differentiation is large while to lower its export price in industries where the scope for quality differentiation is small. The predictions are consistent with the stylized facts based on Chinese data and robust to various estimation specifications.
Keywords: trade liberalization; tariff; quality; export price; quality upgrading (search for similar items in EconPapers)
JEL-codes: F12 F14 (search for similar items in EconPapers)
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https://mpra.ub.uni-muenchen.de/51370/1/MPRA_paper_51370.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/57376/1/MPRA_paper_51370.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/57402/1/MPRA_paper_51370.pdf revised version (application/pdf)
Journal Article: Trade Liberalization, Quality, and Export Prices (2015)
Working Paper: Trade Liberalization, Quality, and Export Prices (2015)
Working Paper: Trade Liberalization, Quality, and Export Prices (2014)
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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:51370
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