The Appendix reports on the country sample, data sources, industry taxonomies, construction of the UVR, and selected products under the Rauch classification of traded goods.
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The Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, the Slovak Republic, and Slovenia.
Also, as we discuss below, comparison of product quality across countries is challenging. Instead, we focus on the quality changes in a fixed basket of goods over time within a country.
Noteworthy is China’s impressive performance. Figure 3a shows that China’s absolute gain in market share between 1994 and 2004 was large. However, Figure 3b suggests that China’s export expansion was largely commensurate with its catch-up potential and growing economy.
Products are dropped if there are missing values in the construction of the unit values or if there are erratic movements in the unit values.
See the Appendix for details. Using the same R&D metric for all countries does not allow for the possibility that the technology for even a narrowly defined product category may differ across countries. The assumption is that international competition induces countries to adapt or innovate, though in possibly differing ways. In using a common categorization for all countries, we follow, for example, Rajan and Zingales (1998), who apply the U.S. measure of dependence on external finance to all countries.
The term “developing countries” follows the World Bank classification, with the countries highlighted in Appendix Table 1.
It may still be the case—and this analysis does not examine the proposition—that a more ambitious change in production structure (elimination of low-tech products and graduation to new high-tech products) is necessary for increasing world market shares.
To calculate the growth rate of trading partners’ GDP per capita, we use the GDP per capita (in purchasing power parity terms) of a given country’s trading partners in each year. We first take the average of these using the share of each trading partner in that country’s exports as weights, and then calculate the annualized growth rate of this trade-weighted average. The alternative is to first calculate the growth rate for each trading partner and then take the trade-weighted average of the growth rates. The values obtained through these two methods are highly correlated, and the regression results are virtually the same.
For the European Union, 8-digit trade data are available from the Eurostat database COMEXT, and, for the United States, 10-digit data are available from the U.S. Census Bureau. The COMTRADE database accounts for a country’s exports to the world market.