ERF 26th Annual Conference
Capital Inputs Sourcing from China and Export Quality Upgrading
No.
ERF16_49
Publisher
ERF
Date
August, 2020
Topic
D2. Production and Organizations
F1. Trade
In this paper, we revisit the question of how firm-level sourcing decisions affect export performance by specifically studying the export quality impact of the recent shift of Turkish exporters to China in their capital inputs sourcing in the 2003-2015 period using a unique and highly disaggregated firm-product level data from the Turkish Statistical Institute (TurkStat). The first part of our analysis provides a thorough exploration of this rich data set to put forth a number of stylized facts that inform the empirical analysis. In the second part, we estimate the impact of increased sourcing of capital inputs from China on export quality upgrading. Our results identify and emphasize that both the source country and the time of sourcing have very tangible export quality effects. In the case of Turkey, switching from high-quality European producers of capital goods to China has negatively affected export quality. This negative effect was apparent in the first part of the sample where China was a novelty in the WTO and did not have enough time to upgrade its quality. However, in time, China upgraded its quality and only then the shift to China produced positive quality effects for a developing country like Turkey. In the third and last part, we show that these results hold under a number of robustness checks.
Research Fellows
Nergiz Dincer
Professor, Department of Economics and Vice Director,...
Research Fellows
Ayça Tekin-Koru
Director of the Trade Research Center and...