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The Determinants of Quality Specialization

Jonathan Dingel ()

Working Papers from U.S. Census Bureau, Center for Economic Studies

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, Grossman, and Helpman (2011) 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 US manufacturing plants' shipments and factor inputs to quantify the two mechanisms' roles in quality specialization across US cities. Home-market demand explains at least as much of the relationship between income and quality as differences in factor usage.

New Economics Papers: this item is included in nep-ino and nep-int
Date: 2015-06
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https://www2.census.gov/ces/wp/2015/CES-WP-15-15.pdf First version, 2015 (application/pdf)

Related works:
Journal Article: The Determinants of Quality Specialization (2017) Downloads
Working Paper: The Determinants of Quality Specialization (2016) Downloads
Working Paper: The determinants of quality specialization (2014) Downloads
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