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What drives the market share changes? price versus non-price factors

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  • Benkovskis, Konstantins
  • Wörz, Julia

Abstract

The paper proposes a theoretical framework for explaining gains and losses in export market shares by considering both price and non-price determinants. Starting from a demand-side model à la Armington (1969), we relax several restrictive assumptions to evaluate the contribution of unobservable changes in taste and quality, taking into account differences in elasticities of substitution across product markets. Using highly disaggregated trade data from UN Comtrade, our empirical analysis for the major world exporters (G7 and BRIC countries) reveals the dominant role of non-price factors in explaining the competitive gains of BRIC countries and concurrent decline in the G7’s share of world exports. JEL Classification: C43, F12, F14, L15

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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 1640.

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Date of creation: Feb 2014
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Handle: RePEc:ecb:ecbwps:20141640

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Keywords: export market share decomposition; non-price competitiveness; real effective exchange rate;

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References

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  1. Menzie D. Chinn, 2005. "A Primer on Real Effective Exchange Rates: Determinants, Overvaluation, Trade Flows and Competitive Devaluation," NBER Working Papers 11521, National Bureau of Economic Research, Inc.
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  7. Benkovskis, Konstantins & Wörz, Julia, 2014. "What drives the market share changes? price versus non-price factors," Working Paper Series 1640, European Central Bank.
  8. Jean Imbs & Isabelle Mˆmjean, 2008. "Elasticity Optimism," Working Papers 242008, Hong Kong Institute for Monetary Research.
  9. Benkovskis, Konstantins & Wörz, Julia, 2012. "Non-price competitiveness of exports from emerging countries," BOFIT Discussion Papers 19/2012, Bank of Finland, Institute for Economies in Transition.
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  21. Blonigen, Bruce A. & Soderbery, Anson, 2010. "Measuring the benefits of foreign product variety with an accurate variety set," Journal of International Economics, Elsevier, vol. 82(2), pages 168-180, November.
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  23. Schmitz, Martin & De Clercq, Maarten & Fidora, Michael & Lauro, Bernadette & Pinheiro, Cristina, 2012. "Revisiting the effective exchange rates of the euro," Occasional Paper Series 134, European Central Bank.
  24. Juan Carlos Hallak & Peter K. Schott, 2008. "Estimating Cross-Country Differences in Product Quality," NBER Working Papers 13807, National Bureau of Economic Research, Inc.
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Cited by:
  1. 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.

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