Low-wage country competition and the quality content of high-wage country exports

Julien Martin and Isabelle Mejean

Journal of International Economics, 2014, vol. 93, issue 1, 140-152

Abstract: We study how competition from low-wage countries in international markets affects the quality content of high-wage country exports. We focus on aggregate quality changes driven by a reallocation of sales from low- to high-quality exporters, within industries. Two alternative indicators are used on firm-level data to measure quality changes. Both lead to similar conclusions. Namely, we show that the mean quality of French exports increased by 10–15% between 1995 and 2005. Quality improvement is significantly more pronounced in markets in which competition from low-wage countries has increased the most. This holds true for various specifications including two different identification strategies. The results are consistent with competition from low-wage countries leading developed countries to specialize within industries in the production of higher quality goods.

Keywords: Firm-level data; Quality differentiation; Low-wage country competition; Within-industry specialization (search for similar items in EconPapers)
JEL-codes: F12 F14 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (64)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:93:y:2014:i:1:p:140-152

DOI: 10.1016/j.jinteco.2014.02.002

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