Premium
The puzzle of quality upgrading of Chinese exports from the trade liberalization perspective
Author(s) -
Huang Xianhai,
Liu Kun,
Chen Hangyu
Publication year - 2020
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/1468-0106.12330
Subject(s) - tariff , competition (biology) , liberalization , quality (philosophy) , product (mathematics) , economics , international economics , china , free trade , international trade , market economy , ecology , philosophy , geometry , mathematics , epistemology , political science , law , biology
Trade liberalization could accelerate the process of quality upgrading through the competition effect. However, that the quality of Chinese exports exhibits an opposite performance pattern is puzzling. The present paper uses a framework based on multiproduct firms to analyse the mechanism of how the product quality of exports is affected by trade liberalization to explain this puzzle. The model includes two major mechanisms: the competition effect and the market effect. There is a huge gap in the influence on the product quality of exports between a decrease in tariff barriers and non‐tariff barriers: firms' product quality increases (decreases) when non‐tariff barriers (tariff barriers) fall. The data of Chinese firms from 2001 to 2011 supports this conclusion. Further research reveals that the influence of trade liberalization on the product quality of exports in China varies among different types of firms.