Quality selection, sectoral heterogeneity and Chinese exports

Kneller, Richard and Yu, Zhihong (2016) Quality selection, sectoral heterogeneity and Chinese exports. Review of International Economics, 24 (4). pp. 857-874. ISSN 1467-9396

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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 U.S. These results are not compatible with existing heterogeneous firm trade models with constant mark-up such as Melitz (2003) model and its extension to include product quality by Baldwin and Harrigan (2011). We construct a heterogeneous firm trade model with quality differences as in Baldwin and Harrigan (2011) and spatial price discrimination based on Melitz and Ottaviano (2008), and show that the model provides plausible explanations for our empirical finds as well as other existing findings in the literature.

Item Type: Article
Additional Information: This is the peer reviewed version of the following article: Kneller, R. and Yu, Z. (2016), Quality Selection, Sectoral Heterogeneity and Chinese Exports. Review of International Economics, 24: 857–874. doi:10.1111/roie.12241, which has been published in final form at: http://onlinelibrary.wiley.com/doi/10.1111/roie.12241/abstract. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
Keywords: product quality; heterogeneous firms; Chinese exports
Schools/Departments: University of Nottingham UK Campus > Faculty of Social Sciences > School of Economics
Identification Number: https://doi.org/10.1111/roie.12241
Depositing User: Eprints, Support
Date Deposited: 21 May 2016 13:42
Last Modified: 26 Sep 2016 14:46
URI: http://eprints.nottingham.ac.uk/id/eprint/32944

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