Abstract: This paper analyzes the impact of the income distribution of destination markets on the quality upgrading of export products based on a theoretical model. On the basis of this, it makes use of the matched data of industrial?enterprises and Chinese customs to test the conclusions of the theoretical model under the conditions of controlling the market size of the destination country and the enterprise-level?features. The results show that the rise of the degree of income inequality in the destination country will reduce the degree of quality preference of the whole country, thus on the one hand the quality upgrading of the export product will be hindered, and on the other hand the enterprises will selectively export low-quality products to the country. The results of the sample tests show that compared with the advanced economies, the rise of the domestic income inequality will significantly hinder the quality upgrading of the products exported to the country as far as the developing countries with lower economic development levels are concerned. Ultimately a large number of low quality products will flood in the domestic markets of the developing countries with high degree of income inequality.

Key words: destination markets; income distribution; export enterprises; product quality