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The Determinants of Quality Specialization

Jonathan Dingel ()

Review of Economic Studies, 2017, vol. 84, issue 4, 1551-1582

Abstract: A growing literature suggests that high-income countries export high-quality goods. Two hypotheses may explain such specialization, with different implications for welfare, inequality, and trade policy. Fajgelbaum et al. formalize the Linder hypothesis that home demand determines the pattern of specialization and, therefore, predict that high-income locations export high-quality products. The factor-proportions model also predicts that skill-abundant, high-income locations export skill-intensive, high-quality products. Prior empirical evidence does not separate these explanations. I develop a model that nests both hypotheses and employ microdata on U.S. manufacturing plants’ shipments and factor inputs to quantify the two mechanisms’ roles in quality specialization across U.S. cities. Home-market demand explains as much of the relationship between income and quality as differences in factor usage.

Keywords: Quality specialization; Product quality; Market access; Home-market effect (search for similar items in EconPapers)
JEL-codes: F12 F14 R12 (search for similar items in EconPapers)
Date: 2017
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Working Paper: The Determinants of Quality Specialization (2016) Downloads
Working Paper: The Determinants of Quality Specialization (2015) Downloads
Working Paper: The determinants of quality specialization (2014) Downloads
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