Economics, Econometrics and Finance
3 years ago

Trade liberalization leads to quality polarization, reshaping global trade patterns.

SSRN Electronic Journal
Quality Polarization and International Trade
Till Ferdinand Hollstein, Kristian Estévez

Paper Summary

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The article explores how firms' choices in input quality and costs affect the distribution of product quality. Trade liberalization and stronger vertical linkages can lead to a concentration of firms around certain quality levels, known as quality polarization. This helps explain patterns in firm size, prices, and quality of exported goods.