Trade margins, quality upgrading, and China’s agri-food export growth

Abstract

Purpose

The purpose of this paper is to find out the source and pattern of China’s agri-food export growth mainly along the intensive margin and the factors affecting it, especially the determinants contributing most to sustainable export growth.

Design/methodology/approach

The paper phases in three empirical steps: analyzing highly-disaggregated agri-food export data of China to 213 countries or economies and attempting to find some stylized facts; consecutively decomposing China’s agri-food export volume into three trade margins and calculating each of them; based on an extended heterogeneity firm and trade model with the quality margin being introduced, investigating the source and pattern of China’s agri-food export growth and the role of relevant determinants.

Findings

The paper reveals that the relative quality upgrading explains most of the increase along the intensive margin, to which the relative price decrease has a negligible negative contribution. Simultaneously, the heterogeneity across products does matter, since we find that the relative quality improvement and relative product price decline are more prominent for the differentiated products with larger quantity expansion along the intensive margins.

Originality/value

With quality upgrading dynamically, we attribute China’s long-term agri-food export growth to the quantity penetration along the intensive margin. With the relative product price distinction reflecting factor costs and productivity differences across industries, the comparative quality upgrading in differentiated products might correlate with their upward production productivity.

Citation

Tian, D., Hu, N., Wang, X. and Huang, L. (2016), "Trade margins, quality upgrading, and China’s agri-food export growth", China Agricultural Economic Review, Vol. 8 No. 2. https://doi.org/10.1108/CAER-12-2013-0156