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Quality Competition Versus Price Competition Goods: An Empirical Classification

Author

Listed:
  • E. Baldwin, Richard

    (Graduate Institute)

  • Ito, Tadashi

    (Okinawa University)

Abstract
Based on theoretical distinctions suggested by the heterogeneous firms trade model and the quality heterogeneous firms trade model, we classify exports at the HS 6-digit level as being characterised by either quality or price competition. We find a high proportions of quality-competition goods for the major EU countries and lower proportions for Canada, Australia and China. However, the overlap of these quality-competition goods is not large which suggests that the HS-6 digit data is too aggregate; firm-level data may be needed. Our findings suggest that dumping investigations must pay careful attention to the exact definition of products, and the study of technological gaps across nations by analysing composition of their export basket (Hausman, Huang and Rodrik 2007) should be interpreted with caution.

Suggested Citation

  • E. Baldwin, Richard & Ito, Tadashi, 2011. "Quality Competition Versus Price Competition Goods: An Empirical Classification," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 26, pages 110-135.
    • Handle: RePEc:ris:integr:0532
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    References listed on IDEAS

    as
    1. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    2. Richard Baldwin & James Harrigan, 2011. "Zeros, Quality, and Space: Trade Theory and Trade Evidence," American Economic Journal: Microeconomics, American Economic Association, vol. 3(2), pages 60-88, May.
    3. Baldwin, Richard, 1988. "Hyteresis in Import Prices: The Beachhead Effect," American Economic Review, American Economic Association, vol. 78(4), pages 773-785, September.
    4. Lionel Fontagné & Guillaume Gaulier & Soledad Zignago, 2008. "Specialization across varieties and North–South competition [‘Multi-Product Firms and Trade Liberalization’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 23(53), pages 52-91.
    5. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    6. Peter K. Schott, 2008. "The relative sophistication of Chinese exports [‘Manufacturing Earnings and Compensation in China’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 23(53), pages 6-49.
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    More about this item

    Keywords

    Quality vs Price Competition; Heterogeneous Firms Trade Model;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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