Research

Working Papers


Abstract: A large and growing literature focuses on product quality differentiation and its positive and normative importance for international trade. In this literature, there are a number of approaches that indirectly infer product quality based on product price and quantity data. I propose a simple test for the robustness of commonly used approaches to quality inference: when purchasing goods from a common set of exporters, do two importers agree on which goods are high quality? This paper examines three most applied approaches (unit values, demand residuals derived from a CES model, and demand residuals derived from an augmented nested logit framework) and calculates the inferred quality of each exporter-product from the perspective of multiple importers. Exporters' unit values and market shares exhibit positive rank correlations across importers. Counter-intuitively, adding additional variables suggested by the demand residual approaches lowers rank correlations, i.e. worsens the agreement among importers. The inconsistency in quality rankings across importers is very robust, occurring across all industries and regardless of the extent of product differentiation, and corresponds to quite large differences in the price-equivalent variation in quality levels. Further analyses show that such inconsistency is not well explained by changes in the destination-specific quality mix induced by variation in trade costs as in Melitz (2003) or the Alchian-Allen effect (Hummels and Skiba, 2004), or by time invariant differences in consumers' preferences and tastes across importers.

Work in Progress

Non-Tariff Measures, Import and Product Quality (Updates coming soon)
The Political Economy of Non-Tariff Measures, with David Hummels and Kwan Yong Lee