Price and Quality Changes in Outsiders of Regional Trade Agreements

22 Pages Posted: 14 Oct 2014

See all articles by Toshiyuki Matsuura

Toshiyuki Matsuura

Keio University

Kazunobu Hayakawa

Institute of Developing Economies (IDE-JETRO)

Nuttawut Laksanapanyakul

Thailand Development Research Institute

Yuta Watabe

Keio University

Date Written: October 14, 2014

Abstract

Countries excluded from a regional trade agreement face disadvantages in tariffs when exporting to member countries. In this context, previous studies found that such excluded countries, i.e., outsiders, lower their export prices. In contrast, this study aims to examine not only prices but also the quality of outsiders’ exports. Specifically, we first estimate the quality of products exported from each country to Thailand under certain tariff schemes. In addition to our estimates on cross-price elasticity, we use this measure to compute the potential magnitude of trade diversion for outsiders. Then, we investigate the relationship between this trade diversion and changes in the quality of exports from outsiders. Consequently, we found that only outsiders exporting higher quality products exhibited a greater improvement in quality to decrease the negative effect of tariff disadvantages.

Suggested Citation

Matsuura, Toshiyuki and Hayakawa, Kazunobu and Laksanapanyakul, Nuttawut and Watabe, Yuta, Price and Quality Changes in Outsiders of Regional Trade Agreements (October 14, 2014). Tokyo Center for Economic Research (TCER) Paper No. E-84. Available at SSRN: https://ssrn.com/abstract=2509654

Toshiyuki Matsuura (Contact Author)

Keio University ( email )

2-15-45 Mita
Minato-ku
Tokyo, 108-8345
Japan

Kazunobu Hayakawa

Institute of Developing Economies (IDE-JETRO) ( email )

3-2-2 Wakaba, Mihama-ku
Chiba, 261-8545
Japan

Nuttawut Laksanapanyakul

Thailand Development Research Institute ( email )

United States

Yuta Watabe

Keio University ( email )

2-15-45 Mita
Minato-ku
Tokyo, 108-8345
Japan

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