Quality Selection, Sectoral Heterogeneity and Chinese Exports

18 Pages Posted: 4 Aug 2016

See all articles by Richard Kneller

Richard Kneller

University of Nottingham

Zhihong Yu

University of Nottingham - Leverhulme Centre for Research on Globalisation and Economic Policy (GEP)

Date Written: September 2016

Abstract

Recent models of international trade have identified product quality as an important determinant of bilateral trade flows. In this paper we examine the relationship between the characteristics of the export market and the aggregate quality of products using Chinese data. We find evidence that product unit values vary with standard gravity variables in a different manner across sectors of the Chinese economy and run contrary to earlier findings for the USA. These results are not compatible with existing heterogeneous firm trade models with constant markā€up and the extension to include product quality. We construct a heterogeneous firm trade model with quality differences and spatial price discrimination, and show that the model provides plausible explanations for our empirical finds as well as other existing findings in the literature.

Suggested Citation

Kneller, Richard and Yu, Zhihong, Quality Selection, Sectoral Heterogeneity and Chinese Exports (September 2016). Review of International Economics, Vol. 24, Issue 4, pp. 857-874, 2016. Available at SSRN: https://ssrn.com/abstract=2818103 or http://dx.doi.org/10.1111/roie.12241

Richard Kneller (Contact Author)

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

Zhihong Yu

University of Nottingham - Leverhulme Centre for Research on Globalisation and Economic Policy (GEP) ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

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