Import Competition and Quality Upgrading

The production of high-quality goods is often viewed as a precondition for export success and economic development. We provide the first evidence that countries’ import tariffs affect the rate at which they upgrade product quality. Our analysis uses highly disaggregated data covering exports from 56 countries across 10,000 products to the United States using a novel approach to measure quality. As predicted by distance-to-the-frontier models, we find that lower tariffs are associated with quality upgrading for products close to the world quality frontier, whereas lower tariffs discourage quality upgrading for products distant from the frontier.