Export Quality in Developing Countries

IMF Working Papers, May 15, 2013

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This paper develops new, far more extensive estimates of export quality, covering 178 countries and hundreds of products over 1962–2010.
Quality upgrading is particularly rapid during the early stages of development, with quality convergence largely completed as a country reaches upper middle-income status.
There is significant cross-country heterogeneity in quality growth rates.
Within any given product line, quality converges both conditionally and unconditionally to the world frontier.
Increases in institutional quality and human capital are associated with faster quality upgrading.
Faster growth in quality is associated with more rapid output growth.
The evidence suggests that quality upgrading is best encouraged through a broadly conducive domestic environment, rather than sector-specific policies.
Diversification is important to create new upgrading opportunities.

Coverage: 178 countries.
Product scope: hundreds of products.
Time span: 1962–2010.
Quality upgrading: particularly rapid in early development; convergence largely completed by upper middle-income status.
Cross-country heterogeneity: significant variation in quality growth rates across countries.
Convergence behavior: quality converges both conditionally and unconditionally to the world frontier within product lines.
Associations identified:
- Institutional quality increases → faster quality upgrading.
- Human capital increases → faster quality upgrading.
- Faster quality growth → more rapid output growth.

Encourage quality upgrading through a broadly conducive domestic environment rather than sector-specific policies.
Promote diversification to create new upgrading opportunities.
Strengthen institutional quality and human capital as levers to accelerate quality upgrading.