Technical Barriers to Trade, Product Quality and Trade Margins: Firm-level Evidence

Ha Doan and Hongyong Zhang

No DP-2021-54, Working Papers from Economic Research Institute for ASEAN and East Asia (ERIA)

Abstract: As tariffs have declined to a low level, the trade literature has paid increasing attention to the impact of non-tariff measures. Unlike tariffs, non-tariff measures could act as both a barrier to trade and a catalyst for quality upgrading. This study examines the effect of technical barriers to trade (TBTs) on trade margins and quality upgrading at the firm level. To do so, we utilise rich Chinese Customs data recording the universe of export transactions from 2000 to 2012, matched with the Annual Survey of Industrial Firms and the World Trade Organization’s Specific Trade Concerns database. We find that TBTs are associated with higher probability to exit. Surviving exporters enjoy larger sales and charge higher export prices. We also find robust evidence for the quality upgrading effects of TBTs. Firms upgrade their product quality by expanding their research and development and investment and importing more intermediate inputs and capital goods. The positive impact of TBTs on quality upgrading offsets that on price increases, resulting in lower quality-adjusted export prices. This suggests the net welfare-enhancing effect of TBTs for the consumers of imported products. The results hold after controlling for potential endogeneity and across various specifications.

Keywords: Non-tariff Measures; Technical Barrier to Trade; Trade Margins; Quality upgrading; Firm Heterogeneity; China (search for similar items in EconPapers)
JEL-codes: D22 F13 F14 (search for similar items in EconPapers)
Date: 2022-02-07
New Economics Papers: this item is included in nep-cna, nep-int and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Technical Barriers to Trade, Product Quality and Trade Margins: Firm-level evidence (2022)
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