Does trade stimulate product quality upgrading?

Ana Fernandes () and Caroline Paunov

Canadian Journal of Economics, 2013, vol. 46, issue 4, 1232-1264

Abstract: This paper investigates whether increased import competition leads firms to engage in incremental innovation reflected in product quality upgrading using Chilean manufacturing firmproduct data and measuring product quality with unit values (prices). We identify causal effects of import competition using an effective trade barrier measure transport costs as instruments for import penetration ratios across industries. Transport costs have a negative and significant effect on product quality. The evidence suggests that estimated unit value increases capture product quality upgrading, imports competition effects drive quality upgrading, and benefits depend on firms industrial specialization. Easier access to intermediate inputs also fosters quality upgrading.

JEL-codes: F14 L6 O31 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (45)

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