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Crises and the Collapse of World Trade: the Shift to Lower Quality

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  • Antoine Berthou
  • Charlotte Emlinger

Abstract

One of the most striking features of the crisis that started during the fall of 2008 has been the sharp decrease in the world volume of trade in goods. The collapse of trade values has been even larger, leading to a decrease of import price indices. We argue that the decrease of import price indices can be explained by a decrease of the demand addressed to the most expansive varieties. Descriptive statistics for the EU15 confirm that the decrease in the import price index is mainly due to a loss in market shares by high price varieties. The estimation of import demand equations confirm that higher price varieties report a larger elasticity with respect to GDP variations, as compared to low price varieties. Countries specialized over high quality varieties are expected to lose more trade in periods of global turmoil, and experience a faster recovery.

Suggested Citation

  • Antoine Berthou & Charlotte Emlinger, 2010. "Crises and the Collapse of World Trade: the Shift to Lower Quality," Working Papers 2010-07, CEPII research center.
    • Handle: RePEc:cii:cepidt:2010-07
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    References listed on IDEAS

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    1. Pablo Fajgelbaum & Gene M. Grossman & Elhanan Helpman, 2011. "Income Distribution, Product Quality, and International Trade," Journal of Political Economy, University of Chicago Press, vol. 119(4), pages 721-765.
    2. Mark Bils & Peter J. Klenow, 2001. "Quantifying Quality Growth," American Economic Review, American Economic Association, vol. 91(4), pages 1006-1030, September.
    3. Peter K. Schott, 2008. "The relative sophistication of Chinese exports [‘Manufacturing Earnings and Compensation in China’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 23(53), pages 6-49.
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    Citations

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    Cited by:

    1. Julien MARTIN & Florian MAYNERIS, 2013. "High-End Variety Exporters Defying Distance: Micro Facts and Macroeconomic Implications," LIDAM Discussion Papers IRES 2013027, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    2. Rudolfs Bems & Julian di Giovanni, 2016. "Income-Induced Expenditure Switching," American Economic Review, American Economic Association, vol. 106(12), pages 3898-3931, December.
    3. Chen, Natalie & Juvenal, Luciana, 2018. "Quality and the Great Trade Collapse," Journal of Development Economics, Elsevier, vol. 135(C), pages 59-76.
    4. Türkcan, Kemal, 2014. "Investigating the Role of Extensive Margin, Intensive Margin, Price and Quantity Components on Turkey’s Export Growth during 1998-2011," MPRA Paper 53292, University Library of Munich, Germany.
    5. Baiardi, Donatella & Bianchi, Carluccio & Lorenzini, Eleonora, 2015. "The price and income elasticities of the top clothing exporters: Evidence from a panel data analysis," Journal of Asian Economics, Elsevier, vol. 38(C), pages 14-30.
    6. Vladimirov, Zhelyu & Simeonova-Ganeva, Ralitsa & Ganev, Kaloyan, 2013. "Significance of globalization-specific factors for SME competitiveness: a conceptual model and an empirical test," MPRA Paper 63518, University Library of Munich, Germany.
    7. Piero Esposito & Claudio Vicarelli, 2011. "Explaining the Performance of Italian Exports during the Crisis: (Medium) Quality Matters," Working Papers LuissLab 11954, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    8. Julien Burton & Magdalena Kizior, 2021. "Can We Evaluate the Non-Price Competitiveness of French Products Based on Export Data?," European Economy - Economic Briefs 064, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    9. Donatella Baiardi & Carluccio Bianchi & Eleonora Lorenzini, 2014. "The price and income elasticities of the top clothing exporters: Evidence from a panel data analysis," DEM Working Papers Series 074, University of Pavia, Department of Economics and Management.

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    More about this item

    Keywords

    GLOBAL CRISIS; INCOME ELASTICITY; QUALITY LADDERS;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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