Dimensions of quality upgrading - Evidence for CEEC´s

The impact of trade integration of Central and Eastern European economies in European markets has been studied extensively. Often these studies observe quality upgrading of CEEC exports. In this paper we consider three dimensions of quality upgrading: upgrading across industries, upgrading across different quality segments within industries, and finally, product upgrading within quality segments inside industries. For the analysis we partition industries into distinct quality segments based on EU-15 import unit values. The results for ten CEECs (CEE-5,Baltics and Southeastern Europe) and thirteen industries suggest fundamental differences, both, across country groups and across the three different notions of quality upgrading. The CEE-5 show no evidence of entering a "low-quality trap" in all three dimensions. While there is in general catching-up across industries and inside quality segments, convergence to the EU-level is significantly slower in the high quality segments for the Baltics and Southeast Europe. Thus, the second notion of low-quality specialization may be applicable to these countries.