Competition and Quality Upgrading in Export Markets: The case of Peruvian Apparel Exports
Renzo Castellares ()
No 2015-010, Working Papers from Banco Central de Reserva del Perú
This paper uses the exponential growth in Chinese exports from 2001 to 2006 to evaluate the effects of a competition shock from a low-wage competitor on exporters from a developing country. In particular, this research considers heterogeneous quality upgrading strategies of Peruvian apparel firms in response to an influx of low-cost Chinese apparel goods. Using firm-level data from Peruvian customs and a survey of Peruvian manufactures, I find that more productive firms upgrade their product quality to differentiate them from low-cost and low-quality Chinese apparel goods. Conversely, less productive Peruvian firms, which are not able to increase their quality, react by reducing their prices. Finally, I also find evidence that the average quality of Peruvian apparel products increase during 2001 to 2007.
Keywords: Trade; competition; quality; trade finance (search for similar items in EconPapers)
JEL-codes: F14 O14 O30 (search for similar items in EconPapers)
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