Fast Fashion: Theory and Evidence from Portuguese Textile and Clothing Firms

70 Pages Posted: 28 Feb 2020

See all articles by Ana Fernandes

Ana Fernandes

University of Exeter

Heiwai Tang

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS); The University of Hong Kong - Faculty of Business and Economics; CESIfo; Kiel Institute for the World Economy

Date Written: 2020

Abstract

We study how firms respond to import competition by increasing the speed of trade. We use data on all Portuguese textile and clothing exporters' monthly transactions and exploit the exogenous increase in competition following the removal of Multi-Fibre Arrangement (MFA) quotas on Chinese exports. The removal of quotas is associated with an increase in the price and frequency of export transactions and with a reduction in average distance of firms' exports. We rationalize our findings with a heterogeneous-firm model of exporting where firms decide which markets to serve as well as the frequency of transactions and the quality of exported products in each market. In response to low-wage competition, the more productive firms increase exports of high-quality products to nearby markets, while the less productive firms drop out from distant and low-income markets. These changes in export patterns imply that advanced economies become more specialized in "fast-fashion"—exporting higher quality products to closer markets at higher frequency.

Keywords: export frequency, fast fashion, just-in-time trade, low-wage country competition, heterogeneous firms, quality upgrading

JEL Classification: F100, F200

Suggested Citation

Fernandes, Ana and Tang, Heiwai, Fast Fashion: Theory and Evidence from Portuguese Textile and Clothing Firms (2020). CESifo Working Paper No. 8125, Available at SSRN: https://ssrn.com/abstract=3545722

Ana Fernandes (Contact Author)

University of Exeter ( email )

Northcote House
The Queen's Drive
Exeter, Devon EX4 4QJ
United Kingdom

Heiwai Tang

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS) ( email )

1740 Massachusetts Avenue, NW
Washington, DC 20036-1984
United States

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

CESIfo ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, Schleswig-Hosltein D-24100
Germany

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