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Trade Liberalization, Quality, and Export Prices

Haichao Fan, Yao Li () and Stephen Yeaple

MPRA Paper from University Library of Munich, Germany

Abstract: 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)
New Economics Papers: this item is included in nep-int
Date: 2013-11-01
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Downloads: (external link)
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)

Related works:
Journal Article: Trade Liberalization, Quality, and Export Prices (2015) Downloads
Working Paper: Trade Liberalization, Quality, and Export Prices (2015) Downloads
Working Paper: Trade Liberalization, Quality, and Export Prices (2014) Downloads
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