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American Economic Review Vol. 108 No. 1 2018

Trade, Quality Upgrading, and Input Linkages: Theory and Evidence from Colombia

Ana Cecília Fieler1; Marcela Eslava2; Daniel Yi Xu3

1 Department of Economics, University of Pennsylvania, 3718 Locust Walk, Philadelphia, PA 19104, and NBER (email: ) · 2 Department of Economics, Universidad de Los Andes, Calle 19A No. 1-37 Este, Bloque W, Bogotá, Colombia, 111711, and CEDE (email: ) · 3 Department of Economics, Duke University, 213 Social Sciences Building, 419 Chapel Drive, Box 90097, Durham, NC 27708, and NBER (email: )

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Abstract

A quantitative model brings together theories linking international trade to quality, technology, and demand for skills. Standard effects of trade on importers and exporters are magnified through domestic input linkages. We estimate the model with data from Colombian manufacturing firms before the 1991 trade liberalization. A counterfactual trade liberalization is broadly consistent with post-liberalization data. It increases skill intensity from 12 to 16 percent, while decreasing sales. Imported inputs, estimated to be of higher quality, and domestic input linkages are quantitatively important. Economies of scale, export expansion, and reallocation of production are small and cannot explain post-liberalization data.

DOI
10.1257/aer.20150796
Volume
108
Issue
1
Pages
109-146
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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