NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Ana Cecilia Fieler

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March 2014Trade, Skills, and Quality Upgrading: A Theory with Evidence from Colombia
with Marcela Eslava, Daniel Xu: w19992
We develop a model of international trade with heterogeneous firms and endogenous quality choices. Producing higher quality involves returns to scale, it is intensive in skilled labor and high-quality inputs. Firms’ quality choices are interrelated because firms sell their goods to consumers and to other firms. We estimate the model using data on manufacturing plants in Colombia before the trade liberalization, simulate a counterfactual liberalization and compare the results to post-liberalization data. Like other unilateral trade liberalizations in developing countries, the skill premium and skill intensity in manufacturing increased, and the size of firms decreased in Colombia. In the model, lower tariffs lead importers and exporters to upgrade quality, increasing the domestic demand and...

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