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Journal of Economic Integration 2011 March;26(1) :110-135.
DOI: https://doi.org/10.11130/jei.2011.26.1.110
Quality Competition Versus Price Competition Goods: An Empirical Classification
Richard E. Baldwin and 
Tadashi Ito 
Graduate Institute
Okinawa University
Copyright ©2011 Journal of Economic Integration
ABSTRACT

Based on theoretical distinctions suggested by the heterogeneous firms trade model and the quality heterogeneous firms trade model, we classify exports at the HS 6-digit level as being characterised by either quality or price competition. We find a high proportions of quality-competition goods for the major EU countries and lower proportions for Canada, Australia and China. However, the overlap of these quality-competition goods is not large which suggests that the HS-6 digit data is too aggregate; firm-level data may be needed. Our findings suggest that dumping investigations must pay careful attention to the exact definition of products, and the study of technological gaps across nations by analysing composition of their export basket (Hausman, Huang and Rodrik 2007) should be interpreted with caution.

JEL Classification: F14

Keywords: Quality vs Price Competition | Heterogeneous Firms Trade Model
 
REFERENCE
1. Baldwin, Richard (1988), Hysteresis in Import Prices: The Beachhead Effect, American Economic Review, American Economic Association, 78(4), 773-85, September.
2. Baldwin, Richard and Harridan, James (2010), Zeros, Quality and Space: Trade Theory and Trade Evidence, American Economic Journal Microeconomics, forthcoming.
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