Estimating the Quality of Greek Exports : A Non-Price Based Approach

Product quality affects how countries specialize in production and international trade: higher-quality varieties of existing products help build on existing comparative advantages to boost productivity and exports. The main challenge faced in related empirical studies is that quality is unobserved and is often proxied by prices (unit values), defined as the ratio of export value over quantity. However, unit values cannot account for differences in the composition of goods and their production costs, or pricing strategies across exporters. Moreover, supply or demand shocks will affect prices without necessarily affecting product quality. This paper assesses the quality of Greek exports over period 1998-2012 based on the straightforward intuition that “conditional on price, higher market shares are assigned higher quality”. Export quality is estimated to have fallen by 0.7 percentage points per year on average for the period 1998-2010, but recovered in 2011 and 2012 when it displayed a cumulative rise of 18.7%, yielding an average annual rise of 0.7 percentage points for the period 1998-2012