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Measuring the benefits of foreign product variety with an accurate variety set

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  • Blonigen, Bruce A.
  • Soderbery, Anson

Abstract

Recent studies have used import data to assess the impact of foreign varieties on domestic prices and welfare. We employ a market-based data set on the U.S. automobile market that allows us to define goods varieties at a more precise level, as well as discern location of production and ownership of varieties. Our estimates of price and welfare changes from new varieties in the U.S. automobile sector are twice as large as standard estimates when using our detailed market-based data. We also show that new varieties introduced by foreign-owned affiliates provided an additional 70% welfare gain during our sample.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 82 (2010)
Issue (Month): 2 (November)
Pages: 168-180

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Handle: RePEc:eee:inecon:v:82:y:2010:i:2:p:168-180

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Web page: http://www.elsevier.com/locate/inca/505552

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Keywords: Product variety Trade Armington Monopolistic competition Automobiles;

References

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  1. Frank Verboven, 1996. "International Price Discrimination in the European Car Market," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 240-268, Summer.
  2. Goldberg, Pinelopi K. & Verboven, Frank, 2005. "Market integration and convergence to the Law of One Price: evidence from the European car market," Journal of International Economics, Elsevier, vol. 65(1), pages 49-73, January.
  3. David E. Weinstein & Christian Broda, 2004. "Globalization And The Gains From Variety," Econometric Society 2004 Latin American Meetings 327, Econometric Society.
  4. Jean Imbs & Isabelle Mejean, 2008. "Elasticity Optimism," EIEF Working Papers Series 0805, Einaudi Institute for Economics and Finance (EIEF), revised Mar 2008.
  5. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
  6. Daniel A. Ackerberg & Marc Rysman, 2005. "Unobserved Product Differentiation in Discrete-Choice Models: Estimating Price Elasticities and Welfare Effects," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 771-788, Winter.
  7. Soderbery, Anson, 2010. "Investigating the asymptotic properties of import elasticity estimates," Economics Letters, Elsevier, vol. 109(2), pages 57-62, November.
  8. Amil Petrin, 2002. "Quantifying the Benefits of New Products: The Case of the Minivan," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 705-729, August.
  9. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-77, March.
  10. Goldberg, Pinelopi Koujianou, 1995. "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," Econometrica, Econometric Society, vol. 63(4), pages 891-951, July.
  11. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
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Citations

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Cited by:
  1. Bruce A. Blonigen & Christopher R. Knittel & Anson Soderbery, 2013. "Keeping it Fresh: Strategic Product Redesigns and Welfare," NBER Working Papers 18997, National Bureau of Economic Research, Inc.
  2. Konstantins Benkovskis & Julia Wörz, 2012. "Non-Price Competitiveness of Exports from Emerging Countries," FIW Working Paper series 100, FIW.
  3. Konstantins Benkovskis & Julia Wörz, 2012. "Non-Price Competitiveness Gains of Central, Eastern and Southeastern European Countries in the EU Market," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 27-47.
  4. Benkovskis , Konstantins & Wörz , Julia, 2013. "What drives the market share changes? Price versus non-price factors," BOFIT Discussion Papers 18/2013, Bank of Finland, Institute for Economies in Transition.
  5. Lukas Mohler & Michael Seitz, 2012. "The gains from variety in the European Union," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 148(3), pages 475-500, September.
  6. Nakhoda, Aadil, 2012. "The effect of foreign competition on product switching activities: A firm level analysis," MPRA Paper 39167, University Library of Munich, Germany.
  7. Sónia Cabral & Cristina Manteu, 2011. "The price elasticity of external demand: how does Portugal compare with other euro area countries?," Working Papers w201127, Banco de Portugal, Economics and Research Department.
  8. Konstantins Benkovskis & Ramune Rimgailaite, 2010. "The Quality and Variety of Exports from New EU Member States: Evidence from Very Disaggregated Data," Working Papers 2010/02, Latvijas Banka.
  9. Springborn, Michael & Romagosa, Christina M. & Keller, Reuben P., 2011. "The value of nonindigenous species risk assessment in international trade," Ecological Economics, Elsevier, vol. 70(11), pages 2145-2153, September.
  10. Lukas Mohler, 2012. "Variety Gains and the Extensive Margin of Trade," Working papers 2012/16, Faculty of Business and Economics - University of Basel.
  11. Konstantins Benkovskis & Julia Wörz, 2011. "How Does Quality Impact on Import Prices?," Working Papers 175, Oesterreichische Nationalbank (Austrian Central Bank).

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