Trade liberalization, quality, and export prices

Haichao Fan, Yao Amber Li, Stephen R. Yeaple

Research output: Contribution to journalArticlepeer-review

122 Scopus citations

Abstract

This paper presents theory and evidence from disaggregated Chinese data that tariff reductions induce a country's producers to upgrade the quality of their exports. We first document stylized facts regarding the effect of trade liberalization on export prices. Next, we develop an analytic framework that relates a firm's choice of quality to its access to imported intermediates. In the model, a reduction in import tariffs induces a firm to increase export quality and raise its export price in industries where the scope for quality differentiation is large and lower its export price in industries where the scope is small. The predictions are consistent with the stylized facts and are highly robust econometrically.

Original languageEnglish (US)
Pages (from-to)1033-1051
Number of pages19
JournalReview of Economics and Statistics
Volume97
Issue number5
DOIs
StatePublished - Dec 1 2015

All Science Journal Classification (ASJC) codes

  • Social Sciences (miscellaneous)
  • Economics and Econometrics

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