Working Paper: NBER ID: w15178
Authors: Amit Khandelwal
Abstract: Prices are typically used as proxies for countries' export quality. I relax this strong assumption by exploiting both price and quantity information to estimate the quality of products exported to the U.S. Higher quality is assigned to products with higher market shares conditional on price. The estimated qualities reveal substantial heterogeneity in product markets' scope for quality differentiation, or their "quality ladders.'' I use this variation to explain the heterogeneous impact of low-wage competition on U.S. manufacturing employment and output. Markets characterized by relatively shorter quality ladders are associated with larger employment and output declines resulting from low-wage competition.
Keywords: quality ladders; low wage competition; quality specialization; product differentiation
JEL Codes: F1; F15; F16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher quality (L15) | higher market shares (L17) |
| length of quality ladder (L15) | impact of low-wage competition on employment (F66) |
| low-wage penetration (F66) | decline in employment (J63) |