DOI QR코드

DOI QR Code

Assessment of the Korean-Chinese Exports Competition in Sophisticated Markets

  • La, Jung Joo (Pi-Touch Institute) ;
  • Shin, Wonkyu (Department of Global Commerce at Soong-sil University Center for International Development Coopeartion, Kyung Hee University)
  • Received : 2018.06.18
  • Accepted : 2018.12.13
  • Published : 2019.04.30

Abstract

Purpose - This paper empirically investigates the competition effect of exports between Korea and China in their common-export markets considering market sophistication. Modern market sophistication includes an importing country's aggregate demand for products of high quality, design, novelty, eco-friendliness, and even IPR protection. Using an empirical analysis to identify the demand for product quality across countries, this paper estimates the effects of market sophistication on the competition between Korean exports and Chinese products. Design/Methodology - Our empirical model considers the relationship between an importing country's consumer sophistication and the export competition between Korea and China. This study employs the existing theoretical framework to identify the aggregate demand for product quality across countries. Using a quite direct measurement (the consumer sophistication index, our analysis investigates the differential effects of Korea's export market sophistication, particularly in markets where Korean exports are in competition with similar Chinese products. Findings - Our main findings can be summarized as follows: the negative effects of the export competition between Korea and China on Korea's exports are stronger in third markets where consumers are less sophisticated while the effects are not as pronounced in markets where consumers are more sophisticated. This result, however, best applies to differentiated goods which significantly vary in product quality. Originality/value - Existing studies focus on the supply side of production and make the assumption that the market preference for export quality is identical across countries. This paper attempts to evaluate the export competition between Korea and China from the demand-side perspective. This area of trade studies is underexplored both empirically and in theory, although the issue has long been important to Korean and world trade.

Keywords

Acknowledgement

This work was supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2018S1A3A2075117).

References

  1. Barnes, J. G. and M. Ronald (1983), "Segmenting Industrial Markets by Buyer Sophistication", European Journal of Marketing, 17, 16-33. https://doi.org/10.1108/EUM0000000004820
  2. Bjorner, T. B., L. G. Hansen and C. S. Russell (2004), "Environmental Labeling and Consumers' Choice-an Empirical Analysis of the Effect of the Nordic Swan", Journal of Environmental Economics and Management, 47, 411-434. https://doi.org/10.1016/j.jeem.2003.06.002
  3. Cherian, J. and J. Jacob (2012), "Green Marketing: A Study of Consumers' Attitude towards Environment Friendly Products", Asian Social Science, 8(12), 117.
  4. Dean, J. M., K. C. Fung and Z. Wang (2011), "Measuring Vertical Specialization: The Case of China", Review of International Economics, 19(4), 609-625. https://doi.org/10.1111/j.1467-9396.2011.00969.x
  5. Deardorff, A. V. (2008), "Gains from Trade and Fragmentation". In S. Brakman and H. Garretsen (Eds.), Foreign Direct Investment and the Multinational Enterprise, Cambridge, MA: MIT Press.
  6. Eichengreen, B., Yeong-Seop Rhee and H. Tong (2007), "China and the Exports of Other Asian Countries", Review of World Economics, 143, 201-226. https://doi.org/10.1007/s10290-007-0105-0
  7. Felipe, J., U. Kumar, N. Usui and A. Abdon (2012), "Why has China Succeeded? And Why it will Continue to Do So", Cambridge Journal of Economics, 37(4), 791-818. https://doi.org/10.1093/cje/bes058
  8. Finger, J. M. and M. E. Kreinin (1979), "A Measure of Export Similarity and its Possible Uses", Economic Journal, 89, 905-912. https://doi.org/10.2307/2231506
  9. Flam, H. and E. Helpman (1987), "Vertical Product Differentiation and North-South Trade", American Economic Review, 77, 810-822.
  10. Garvin, D. A. (1984), "What does Product Quality Really Mean?", Sloan Management Review, 26, 25-43.
  11. Gereffi, G. and S. Frederick (2010), Global Value Chains in a Postcrisis World: A Development Perspective - The Global Apparel Value Chain, Trade, and the Crisis: Chalenges and Opportunities for Developing Countries, Washington, DC: World Bank.
  12. Greenaway, D., A. Mahabir and C. Milner (2008), "Has China Displaced Other Asian Countries' Exports?", China Economic Review, 19, 152-169. https://doi.org/10.1016/j.chieco.2007.11.002
  13. Hallak, J. C. (2006), "Product Quality and the Direction of Trade", Journal of International Economics, 68, 238-265. https://doi.org/10.1016/j.jinteco.2005.04.001
  14. Hallak, J. C. and P. K. Schott (2011), "Estimating Cross-country Differences in Product Quality", Quarterly Journal of Economics, 126(1), 417-474. https://doi.org/10.1093/qje/qjq003
  15. Ianchovichina, E. and T. Walmsley (2005), "Impact of China's WTO accession on East Asia", Contemporary Economic Policy, 23, 261-277. https://doi.org/10.1093/cep/byi020
  16. Jenkins, R., E. D. Peters and M. Moreira (2008), "The Impact of China on Latin America and the Caribbean", World Development, 36(2), 235-253. https://doi.org/10.1016/j.worlddev.2007.06.012
  17. Lall, S. and M. Albaladejo (2004), "China's Competitive Performance: A Threat to East Asian Manufactured Exports?", World Development, 32, 1441-1466. https://doi.org/10.1016/j.worlddev.2004.03.006
  18. Lall, S., J. Weiss and H. Oikawa (2005), "China's Competitive Threat to Latin America: An Analysis for 1990-2002", Oxford Development Studies, 33, 163-194. https://doi.org/10.1080/13600810500137764
  19. Lambert, Z. V. (1972), "Price and Choice Behavior", Journal of Marketing Research, 9, 35-40. https://doi.org/10.2307/3149603
  20. Messerlin, P. A. and Won-Kyu Shin (2017), "The Success of K-pop: How Big and Why So Fast?", Asian Journal of Social Science, 45(4-5), 409-439. https://doi.org/10.1163/15685314-04504003
  21. Morrison, A., C. Pietrobelli and R. Rabellotti (2008), "Global Value Chains and Technological Capabilities: a Framework to Study Learning and Innovation in Developing Countries", Oxford Development Studies, 36(1), 39-58. https://doi.org/10.1080/13600810701848144
  22. Rauch, J. E. (1999), "Networks versus Markets in International Trade", Journal of International Economics, 48, 7-35. https://doi.org/10.1016/S0022-1996(98)00009-9
  23. Rodrik, D. (2006), "What's So Special about China's Exports?", China and World Economy, 14(5), 1-19. https://doi.org/10.1111/j.1749-124X.2006.00038.x
  24. Schott, P. K. (2004), "Across-product versus Within-product Specialization in International Trade", Quarterly Journal of Economics, 119, 647-678. https://doi.org/10.1162/0033553041382201
  25. Schott, P. K. (2008), "The Relative Sophistication of Chinese Exports", Economic Policy, 23, 5-49. https://doi.org/10.1111/j.1468-0327.2007.00195.x
  26. Shin, Won-Kyu and Duk-Geun Ahn (2017), "Firm's Responsive Behaviors in WTO Trade Disputes: Countervailing Cases on Korean DRAMs", Journal of World Trade, 51(4), 605-644.
  27. Shin, Won-Kyu and Duk-Geun Ahn (2019), "Trade Gains from Legal Rulings in the WTO Dispute Settlement System", World Trade Review, 18(1), 1-31. https://doi.org/10.1017/S1474745617000544
  28. Shin, Won-Kyu, Keun Lee and W. G. Park (2016), "When an Importer's Protection of IPR Interacts with an Exporter's Level of Technology: Comparing the Impacts on the Exports of the North and South", The World Economy, 39(6), 772-802. https://doi.org/10.1111/twec.12338
  29. Shafaeddin, S. M. (2004), "Is China's Accession to WTO Threatening Exports of Developing Countries?", China Economic Review, 15, 109-144. https://doi.org/10.1016/j.chieco.2003.09.003
  30. Sproles, G. B., L. V. Geistfeld and S. B. Badenhop (1978), "Informational Inputs as Influences on Efficient Consumer Decision-Making", Journal of Consumer Affairs, 12, 88-103. https://doi.org/10.1111/j.1745-6606.1978.tb00635.x
  31. Titus, P. A. and J. L. Bradford (1996), "Reflections on Consumer Sophistication and its Impact on Ethical Business Practice", Journal of Consumer Affairs, 30(1), 170-194. https://doi.org/10.1111/j.1745-6606.1996.tb00730.x
  32. Townsend, B. (1991), "Western Consumers in the 1990s", Marketing Research, 3, 71-73.
  33. Weder, R. (1996), "How Domestic Demand Shapes the Pattern of International Trade", World Economy, 19, 273-286. https://doi.org/10.1111/j.1467-9701.1996.tb00678.x
  34. Xing, Y. (2014), "China's High-tech Exports: The Myth and Reality", Asian Economic Papers, 13(1), 109-123. https://doi.org/10.1162/asep_a_00256
  35. Xing, Y. (2016), "Global Value Chains and China's Exports to High-income Countries", International Economic Journal, 30(2), 191-203. https://doi.org/10.1080/10168737.2016.1148403