Import competition and quality upgrading revisited: the role of overall protection

Import competition has been proxied by tariff protection in the extant literature on the impact of import competition on quality upgrading. This paper argues that allowing for non-tariff barriers as well as tariffs in measuring trade protection offers a more accurate measure of import competition. It investigates how the relationship between import competition and quality upgrading is affected by how import competition is measured by whether import competition is measured by overall protection rather than by tariff protection only. The import competition–quality upgrading relationship is shown to be sensitive to how import competition is measured, as well as the sample of countries and the measure of quality used in the empirical analysis. Tariff protection is found to be an inadequate measure for import competition for those products where non-tariff measures are also applied to protect against imports. Our study shows that import competition needs to be measured with care, especially in a world where tariffs are a relatively less important and non-tariff measures a relatively more important form of protection.