Low-wage countries’ competition, reallocation across firms and the quality content of exports

Pre-print, Working paper: What is the impact of low-wage countries' competition on the quality of high-wage countries' exports? To answer this question, we develop a new method that uses firm-level data to measure quality changes in sectoral exports. Over 1995-2005, we measure a 11% increase in the mean quality of France's aggregate exports, driven by a reallocation of demand in favor of higher quality producers. The phenomenon is significantly more pronounced in markets where the penetration of developing countries has increased while it is negative where firms face increased competitive pressures from high-wage countries. These results are consistent with within-product specialization along the vertical dimension. They suggest that, over the period, France has specialized in the production of higher quality goods. In our data, around one fifth of the measured quality improvement in France's aggregate exports is attributable to low-wage countries' competition. In turn, its increasing specialization in higher quality goods has limited France's market share loss over the period.

Author(s)

Julien Martin, Isabelle Méjean

Date of publication
  • 2011
Keywords JEL
F12 F14
Keywords
  • Firm-Level Data
  • Quality Heterogeneity
  • Low-Wage Countries’ Competition
  • Within-product specialization
Internal reference
  • G-MonD Working Paper n°20
Version
  • 1