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External Income Shocks, Product Qualities and Export Trade: Empirical Evidences from the Financial Crisis

【Authors】
XIE Jie, JIN Zhao, ZHAO Ting & XIANG Houjun
【WorkUnit】
XIE Jie, JIN Zhao, ZHAO Ting (School of Economics, Zhejiang Gongshang University, 310018)
XIANG Houjun (School of Finance & Investment, Guangdong University of Finance, 510521)
【Abstract】

When demand crosses the border, does the “Quality Engel Curve” effect exist? And how does this effect work? Starting from the new dimension of quality, this paper utilizes difference-in-differences method to analyze the causal relationship among external income shocks, quality differences and export changes based on the natural experimental framework of financial crisis. The empirical results show that the impacts of external income shocks on the exports of high-quality products are stronger than that of low-quality products during the financial crisis, and both the placebo test and the robustness tests confirm the reliability of the estimation results. This paper also estimates the differences in demand of China's export products among firms and regions of different characteristics and some countries of which the economic growth has not been affected in terms of qualities. We cannot find China's export product qualities experienced significant upgrading after the financial crisis. It requires both time and market to upgrade product qualities partly because some developed countries have strengthened the protection of intellectual property rights. However, in the period of global economic adjustment with a slowdown in income growth, China's low-quality products still have considerable export markets. This study will provide some policy references for our country in the post-crisis era to choose export trade modes, country policies and the international trade orientations.

JEL:D29, E32, F47

【KeyWords】
External Income Shocks, Product Quality, Export Trade, Financial Crisis