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Quality Upgrading and its Welfare Cost in U.S. Steel Imports, 1969-74

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  • Randi Boorstein
  • Robert C. Feenstra

Abstract

In this paper we measure the quality change which has occurred in U.S. steel imports during the 1969-74 VRA, using an index number method. Under this approach, the yearly changes in unit values is broken into three components: a quality-adjusted or pure price index; a quality index, which measures changes in the product mix; and a supplier index, which measures changes in the source of supply. We also derive a measure of welfare cost, which equals the inverse of a Paasche price index minus the inverse of an exact price index. Over the 1969-74 VRA period we find quality upgrading of 7.4 percent in U.S. steel imports, which occurs most strongly in the first year. The welfare cost of quality change varies around one percent of import expenditure during 1970-73. This cost is at least as large as the conventional deadweight loss triangle, but smaller than the transfer of quota rents.

Suggested Citation

  • Randi Boorstein & Robert C. Feenstra, 1987. "Quality Upgrading and its Welfare Cost in U.S. Steel Imports, 1969-74," NBER Working Papers 2452, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:2452
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    2. Maria Cipollina & Luca Salvatici, 2008. "Measuring Protection: Mission Impossible?," Journal of Economic Surveys, Wiley Blackwell, vol. 22(3), pages 577-616, July.
    3. Martin, Julien & Mejean, Isabelle, 2014. "Low-wage country competition and the quality content of high-wage country exports," Journal of International Economics, Elsevier, vol. 93(1), pages 140-152.
    4. James E. Anderson & J. Peter Neary, 2003. "The Mercantilist Index of Trade Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 627-649, May.
    5. Freitag, Andreas & Lein, Sarah M., 2023. "Endogenous product adjustment and exchange rate pass-through," Journal of International Economics, Elsevier, vol. 140(C).
    6. A. Auer, Raphael & Chaney, Thomas & Sauré, Philip, 2018. "Quality pricing-to-market," Journal of International Economics, Elsevier, vol. 110(C), pages 87-102.
    7. repec:kap:iaecre:v:11:y:2005:i:2:p:163-173 is not listed on IDEAS
    8. Robert C. Feenstra, 1993. "Measuring the Welfare Effect of Quality Change: Theory and Application of Japanese Autos," NBER Working Papers 4401, National Bureau of Economic Research, Inc.
    9. Gabor Pula & Daniel Santabárbara, 2012. "Is china climbing up the quality ladder?," Working Papers 1209, Banco de España.
    10. Gabor Pula & Daniel Santabárbara, 2012. "Is china climbing up the quality ladder?," Working Papers 1209, Banco de España.
    11. repec:hhs:bofitp:2012_023 is not listed on IDEAS
    12. Ramos, Maria Priscila, 2007. "Politique Commerciale, Qualité et Environnement: une Application aux Négociations Commerciales entre l’Union Européenne et le Mercosur," MPRA Paper 12640, University Library of Munich, Germany.
    13. Lutz, Stefan H., 2002. "The Effects of Quotas on Vertical Intra-Industry Trade," ZEW Discussion Papers 02-61, ZEW - Leibniz Centre for European Economic Research.
    14. Katherine M. Sauer, 2008. "The quality of parallel imports," Economics Bulletin, AccessEcon, vol. 6(44), pages 1-10.
    15. repec:ebl:ecbull:v:6:y:2008:i:44:p:1-10 is not listed on IDEAS

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