# **5.3 Quantity, Price and Quality Effects**

In this section, we decompose the negative effects of NTMs on the intensive margin of firm level trade into product prices and product quantities. On average, we find no effects of NTMs on the import quantities and prices. Across sectors, however, we find different effects. In agriculture, NTMs reduce prices received by exporting firms while exported quantities remain unchanged. If prices proxy quality (e.g., Fernandes et al., 2019), we can interpret this to mean that African countries receive lower prices for exporting lower quality products. In the manufacturing sector, NTMs reduce export volumes but do not affect export prices.

Table 5: The effect of NTMS on quantity and prices

||All sectors||Agriculture||Manufactu|ring|
|---|---|---|---|---|---|---|
|_Outcome:_|Quantity|Unit Values|Quantity|Unit Values|Quantity|Unit Values|
||(1)|(2)|(3)|(4)|(5)|(6)|
|log _NTMpcdt_|_−_0.063|_−_0.007|_−_0.110|_−_0.057<sup>_∗∗_</sup>|_−_0.129<sup>_∗∗_</sup>|0.004|
||(0.041)|(0.014)|(0.082)|(0.025)|(0.063)|(0.032)|
|log _Tari f fpcdt_|0.011|0.001|0.039|_−_0.003|_−_0.021|0.003|
||(0.016)|(0.004)|(0.031)|(0.008)|(0.015)|(0.006)|
|Observations|101,379|101,379|39,502|39,502|61,265|61,265|
|Adjusted _R_<sup>2</sup>|0.762|0.823|0.632|0.803|0.786|0.824|

Notes: It is also possible that NTMs induce firm-level product quality upgrading. There is some evidence to that effect even in the agriculture sector (e.g., Curzi et al., 2020). Thus, it is possible that interpreting our price effects in Table 5 as quality upgrading may be misleading if in our setting unit values do not proxy quality perfectly, but instead reflect differences in efficiency, market power or foreign exchange differences. As a result, we also test the effects of NTMs on product quality upgrading for African exporting firms. To confirm the existence of such an effect, we need to introduce a measure of product quality into our analysis. As such, we follow the set up in Khandelwal et al. (2013) to recover estimated product quality directly from observed trade data. For brevity, we relegate the description of the quality estimation A1. procedure to the Appendix We plot a graph of estimated quality and prices in Figure A1 and find that prices and quality are positively correlated with the correlation being stronger in the manufacturing sector compared to agriculture. Regressing quality and quality-adjusted prices on NTMs, we find no evidence that NTMs induce a quality upgrading effect for firmproduct level exports (Table 6<sup>17</sup> ), giving further credence to our findings in Table 5. If we adjust prices for quality differences, export prices in the agriculture sector remain lower in the presence of NTMs while export prices in the manufacturing sector are higher in the presence of NTMs.

This notwithstanding, the effects of NTMs may also be moderated by product quality Disdier et al. (2023). For instance, their trade effects may be more pronounced in sectors where product quality is high, for example, high-value products in the manufacturing sector, but

> 17Since prices are noisy and our quality estimates will be sensitive to this noise, we drop unit values above the 99th percentile and below the 1st percentile of the unit value distribution.

18