Working Paper No. 186
Published: 2015
Category:
Economics
Quality and the Great Trade Collapse
Natalie Chen & Luciana Juvenal
Abstract
We explore whether the global financial crisis has had heterogeneous e¤ects on traded goods di¤erentiated by quality. Combining a dataset of Argentinean firm-level destination-specific wine exports with quality ratings, we show that higher quality exports grew faster before the crisis, but this trend reversed during the recession. Quantitatively, the effect is large: up to nine percentage points difference in trade performance can be explained by the quality composition of exports. This fight from quality was triggered by a fall in aggregate demand, was more acute when households could substitute imports by domestic alternatives, and was stronger for smaller firms’ exports.