Discussion Paper Details

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Title: Quality and the Great Trade Collapse

Author(s): Natalie Chen and Luciana Juvenal

Publication Date: November 2015

Keyword(s): Exports, Heterogeneity, Multi-product firms, Quality, Trade collapse, Unit values and Wine

Programme Area(s): International Trade and Regional Economics

Abstract: We explore whether the global financial crisis has had heterogeneous effects on traded goods differentiated by quality. Combining a dataset of Argentinean firm-level destination-specific wine exports with quality ratings, we show that higher quality exports grew faster before the crisis, but this trend reversed during the recession. Quantitatively, the effect is large: up to nine percentage points difference in trade performance can be explained by the quality composition of exports. This flight from quality was triggered by a fall in aggregate demand, was more acute when households could substitute imports by domestic alternatives, and was stronger for smaller firms' exports.

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Bibliographic Reference

Chen, N and Juvenal, L. 2015. 'Quality and the Great Trade Collapse'. London, Centre for Economic Policy Research.