DP10931 Quality and the Great Trade Collapse
|Author(s):||Natalie Chen, Luciana Juvenal|
|Publication Date:||November 2015|
|Keyword(s):||Exports, Heterogeneity, Multi-product firms, Quality, Trade collapse, Unit values, Wine|
|JEL(s):||F10, F14, F41|
|Programme Areas:||International Trade and Regional Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=10931|
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.