Who Exports Better Quality Products to Smaller or More Distant Markets?

Abstract

The role of across-firm differences in product quality and firms' competitiveness in determining the spatial patterns of within-product export unit values across destinations is examined in this paper. Using product level export data, it is shown that the average export unit value of a product shipped from the USA or Korea increases with distance and decreases with destination market's size. However, within-product average unit values for products exported from China and India decrease with distance and increase with market size. To interpret these different spatial patterns of unit values across exporting countries, model of quality heterogeneity is developed in which firms differ in their workers' skill level and higher-skilled workers show greater productivity in performing tasks that improve product quality. The model predicts that in relatively skill-abundant countries, exporting firms specialize in high-quality products using relatively cheap skilled labor, whereas, in relatively skill-scarce countries, firms that produce lower-quality products are more competitive.

Multinational exposure, export variety and price: Evidence from Chinese electronics exporters

“…Our results are also in line with the model predicted by Whang (2014) that Chinese domestic firms may have more competitive advantages in the manufacturing of lower-quality products.…”

“…More recent theoretical studies emphasizes the importance of product quality in determining the competitiveness of firms (Baldwin and Harrigan, 2011;Johnson, 2012), with some researchers extending the Melitz (2003) model to allow for endogenous quality choices by heterogeneous firms (Fan et al, 2014;Whang, 2014). 10 As regards the explanatory variables, SIZE denotes firm size, which is measured by the total number of employees.…”

“…Since China has become a globally recognized manufacturing base for electronic products, we take this industry as our primary focus. Following a number of studies in the trade literature, we use the unit value of exports as a proxy for product quality (Bastos and Silva, 2010;Swenson and Chen, 2014;Whang, 2014, Fan et al, 2014. 3 We contribute to the existing literature by providing empirical evidence with several distinct features.…”

Essays on international trade and quality with applications to Greek firms

“…Specifically, they show that differences in firm prices at the productdestination level are associated with the number of varieties covered by each product category, the volume of transactions and the vertical differentiation of products within firms. Whang (2014) develops a model of quality heterogeneity in which firms differ in their workers' skill level and higher-skilled workers are more productive in performing tasks that improve product quality. The model predicts that in relatively skill-abundant countries, firms with higher-skilled labor are more competitive and are able to export their varieties at higher prices to more difficult markets.…”