FOREIGN COMPETITION ALONG THE QUALITY LADDER

• 成果类型: Article
• 署名作者: Piveteau, Paul; Smagghue, Gabriel
• 署名单位: Cornerstone Research; European Central Bank; Bank of France
• 刊物名称: ECONOMIC JOURNAL
• ISSN/ISSBN: 0013-0133
• DOI: 10.1093/ej/uead107
• 发表日期: 2024
• 页码: 1578-1636
• 关键词: random-coefficients logit; INTERNATIONAL-TRADE; import competition; product quality; Plant size; prices; models; markups; demand; SYSTEM

摘要

We document that firms with low prices are more impacted by low-cost competition. To explain this pattern, we propose an empirical model of trade with random-coefficient demand and endogenous product quality. Unlike commonly used demand systems (e.g., constant elasticity of substitution, nested logit), this model generates rich substitution patterns and implies an 'escape-competition' effect: in response to low-cost competition, firms have an incentive to upgrade their product quality. The estimation of the model reveals significant heterogeneity in consumer preferences. Counterfactual experiments suggest that the 'China shock' was significantly more damaging to firms at the bottom of the price distribution, and that quality upgrading had a limited role at mitigating the shock.