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Multi-product firms and product quality

Manova, Kalina; Yu, Zhihong

Authors

Kalina Manova manova@stanford.edu

ZHIHONG YU ZHIHONG.YU@NOTTINGHAM.AC.UK
Associate Professor



Abstract

We examine the global operations of multi-product firms. We present a flexible heterogeneous firm trade model with either limited or strong scope for quality differentiation. Using customs data for China during 2002-2006, we empirically establish that firms allocate activity across products in line with a product hierarchy based on quality. Firms vary output quality across their products by using inputs of different quality levels. Their core competence is in varieties of superior quality that command higher prices but nevertheless generate higher sales. In markets where they offer fewer products, firms concentrate on their core varieties by dropping low-quality peripheral goods on the extensive margin and by shifting sales towards top-quality products on the intensive margin. The product quality ladder also governs firms’ export dynamics, both in general and in response to the exogenous removal of MFA quotas on textiles and apparel. Our results inform the drivers and measurement of firm performance, the effects of trade reforms, and the design of development policies.

Citation

Manova, K., & Yu, Z. (2017). Multi-product firms and product quality. Journal of International Economics, 109, https://doi.org/10.1016/j.jinteco.2017.08.006

Journal Article Type Article
Acceptance Date Aug 28, 2017
Online Publication Date Sep 6, 2017
Publication Date Nov 1, 2017
Deposit Date Sep 11, 2017
Publicly Available Date Sep 7, 2018
Journal Journal of International Economics
Print ISSN 0022-1996
Electronic ISSN 0022-1996
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 109
DOI https://doi.org/10.1016/j.jinteco.2017.08.006
Keywords Trade; Trade reforms; Multi-product firms; Product quality; Export prices
Public URL http://eprints.nottingham.ac.uk/id/eprint/45622
Publisher URL http://www.sciencedirect.com/science/article/pii/S0022199617301101
Copyright Statement Copyright information regarding this work can be found at the following address: http://creativecommons.org/licenses/by-nc-nd/4.0

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Copyright Statement
Copyright information regarding this work can be found at the following address: http://creativecommons.org/licenses/by-nc-nd/4.0





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