Advanced Search
MyIDEAS: Login

Price Vs Quality Competition And The Spatial Pattern Of Average Prices In International Trade

Contents:

Author Info

  • Affortunato Francesca

    ()
    (Scuola Superiore Chieti Pescara, Scienze Manageriali)

  • Mattoscio Nicola
Registered author(s):

    Abstract

    This work investigates the relationship between the average export prices and the distance between the origin and the destination market in international trade. Distance between trading partners obviously stands at the core of I international trade literature and is strictly related with the issue of how countries and firms compete on export markets when transport costs become increasingly stiff. Heterogeneous-Firm Trade (HFT) models predict that only most competitive firms are able to export on distant markets, where it is more difficult to recover from freight costs. However, this simple concept does not lead to unambiguous predictions on the spatial pattern of average export f.o.b. prices. This work uses bilateral product-level data for five top-exporters (US, Germany, China, France, Italy) and all their world partners in order to test the main hypotheses derivable on this issue from theoretical literature. An huge dataset of bilateral international trade flows, the BACI dataset of CEPII, provides data both on values and quantities, allowing to construct productsâ€(tm) unit values (at the 6 digit level of the Harmonized System), approximating average exportsâ€(tm) prices. These data are used as the dependent variable of the econometric test and regressed on a set of explanatory variables: the distance of the destination market from the exporter and other importerâ€(tm)s characteristics. Thus, this test assesses which of the considered theoretical models fit the data best, shedding some light both on the sign and on the determinants of the spatial pattern of average prices. The main finding of this work is that theoretical models not embedding a quality dimension for products do not seem to fit the data very well: it is clear from the econometric test that a positive correlation between average exportsâ€(tm) prices and distance often emerges, denoting a “quality competition†pattern in addition to a possible alternative pattern of “price competitionâ€. Moreover, theoretical models with a quasi-linear demand function (in contrast with a CES one) are able to better explain same evidences emerging from the data.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://anale.steconomiceuoradea.ro/volume/2012/n1/029.pdf
    Download Restriction: no

    Bibliographic Info

    Article provided by University of Oradea, Faculty of Economics in its journal The Journal of the Faculty of Economics - Economic.

    Volume (Year): 1 (2012)
    Issue (Month): 1 (July)
    Pages: 204-210

    as in new window
    Handle: RePEc:ora:journl:v:1:y:2012:i:1:p:204-210

    Contact details of provider:
    Postal: Universitatii str. 1, Office F209, 410087 Oradea, Bihor
    Phone: +40259408799
    Fax: 004 0259 408409
    Email:
    Web page: http://anale.steconomiceuoradea.ro/
    More information through EDIRC

    Related research

    Keywords: average prices; distance; quality; inter-firm selection; spatial price discrimination;

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Ottaviano, Gianmarco & Melitz, Marc, 2008. "Market Size, Trade, and Productivity," Scholarly Articles 3229096, Harvard University Department of Economics.
    2. Richard Kneller & Zhihong Yu, . "Quality Selection, Chinese Exports and Theories of Heterogeneous Firm Trade," Discussion Papers 08/44, University of Nottingham, GEP.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:ora:journl:v:1:y:2012:i:1:p:204-210. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Catalin ZMOLE).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.