A Panel Study of Factor Accumulation and Export Quality

Purba Mukerji

doi:10.3390/jrfm14090447

Abstract

Cross-sectional data show Global North countries export higher quality products at a point in time. Product-level panel data can address if countries improve their export quality over time. The literature has addressed this practically relevant panel question only in small samples over the short term. We addressed it for a large sample, over the long run, focusing on the hitherto overlooked endogeneity between export quality and factor accumulation and the role of export composition. We utilized a two-tiered panel: the panel of countries and the panel of products each country trades. We found some evidence that middle-income countries often upgrade export quality within the same product, but that high- and low-income countries do this less often. Our results appear to support product cycle theory: some countries climb the value ladder, others are competed off from the ladder’s top, and new countries enter markets. Technology appears to be a potential basis for consolidating trade competitiveness over time, as skill accumulation becomes more widespread across countries and loses significance as an explanatory variable. Our results provide some explanation of why Global North countries might resist sharing technology. This research is timely with deadlocked multilateral trade negotiations and looming trade wars. It attempts to contribute to an evidence-based guide to trade policy.

Highlights

We intuitively expect the process of development to be reflected in the increasing sophistication of exports
One potential explanation we have offered is that growing education levels in Global South countries in the latter time period have led to a more level playing field among countries in this regard and removed the edge in trade competitiveness that can be gained from skill improvement
In the country panel regressions results (Section 5.1), capital accumulation has been associated with positive unit value of export growth, except in the case of low income countries

Summary

Introduction

We intuitively expect the process of development to be reflected in the increasing sophistication of exports. Studies of a single or a handful of countries over shorter periods exist in the literature (Schott 2002; Romalis 2004; Fabrizio et al 2007; Verhoogen 2008; Khandelwal 2010). The development process, to be reflected in the increasing sophistication of exports. Transfer of technology leads to increasing competition among countries and further innovation. This implies rising sophistication of exports for all countries, no matter what their stage of development. Understanding the process could contribute to our understanding of how international competition among countries evolves at different stages of development

Objectives

Results

Conclusion