International Conference on Business, Management and Economics vol:2 pages:65-75
Quality of products is considered as the best guarantee for long-term competitiveness of firms and countries. This paper investigates the determinants of the quality of goods traded by the European Union by using panel data econometric techniques. Intra-EU bilateral trade flows are studied at a detailed sectoral level. Our findings confirm the importance of exporters’s and importer’s income for the quality of trade. Next, quality of traded goods diminishes if trading partners are located further apart. In particular we focus on the role of technological innovation. In addition to domestic innovation it appears that international technological spillovers play a major role for the quality of European exports. Nevertheless the importance of technological spillovers depends on the location and the size of the exporting EU countries. Moreover major sectoral and geographical differences are found. These findings are robust for the choice of technology indicators, the model specification and the technological transmission mechanism.