Working Paper: NBER ID: w2452
Authors: Randi Boorstein; Robert C. Feenstra
Abstract: In this paper we measure the quality change which has occurred in U.S. steel imports during the 1969-74 VRA, using an index number method. Under this approach, the yearly changes in unit values is broken into three components: a quality-adjusted or pure price index; a quality index, which measures changes in the product mix; and a supplier index, which measures changes in the source of supply. We also derive a measure of welfare cost, which equals the inverse of a Paasche price index minus the inverse of an exact price index. Over the 1969-74 VRA period we find quality upgrading of 7.4 percent in U.S. steel imports, which occurs most strongly in the first year. The welfare cost of quality change varies around one percent of import expenditure during 1970-73. This cost is at least as large as the conventional deadweight loss triangle, but smaller than the transfer of quota rents.
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Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| quality upgrading of U.S. steel imports (L61) | welfare cost of quality change (L15) |
| trade restrictions (F14) | quality upgrading of U.S. steel imports (L61) |
| quality upgrading of U.S. steel imports (L61) | quality decline in following years (L15) |