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Heterogeneous firms and import quality: evidence from transaction-level prices

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  • Benjamin R. Mandel

Abstract

A key emerging insight in international economics is that the scope for quality differentiation can help to explain patterns in export prices at the level of products or firms. In this paper, a unified theoretical framework of firm heterogeneity in cost and quality is brought to bear on an expansive data set of U.S. import transaction prices collected by the Bureau of Labor Statistics (BLS). The higher moments of the price distribution are used to identify the scope for quality differentiation at the detailed product level; highly differentiated products account for about half of U.S. import value. The product classification is then used to evaluate two claims in the nascent firm-level trade quality literature. First, the positive link between exporter capability and price is found to depend on the nature of the product: productive exporters simultaneously specialize in high-priced varieties in quality differentiated goods and low-priced varieties in more homogeneous goods. Second, a novel time series test documents firm sorting into export markets according to output quality.

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Bibliographic Info

Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 991.

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Date of creation: 2010
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Handle: RePEc:fip:fedgif:991

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Related research

Keywords: Imports - Prices;

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Cited by:
  1. Susan Houseman & Christopher Kurz & Paul Lengermann & Benjamin Mandel, 2011. "Offshoring Bias in U.S. Manufacturing," Journal of Economic Perspectives, American Economic Association, vol. 25(2), pages 111-32, Spring.
  2. Eckel, Carsten & Iacovone, Leonardo & Javorcik, Beata & Neary, J Peter, 2011. "Multi-Product Firms at Home and Away: Cost- versus Quality-based Competence," CEPR Discussion Papers 8186, C.E.P.R. Discussion Papers.
  3. Masashige Hamano, 2013. "On business cycles of variety and quality," CREA Discussion Paper Series 13-21, Center for Research in Economic Analysis, University of Luxembourg.
  4. Matthieu Crozet & Keith Head & Thierry Mayer, 2012. "Quality Sorting and Trade: Firm-level Evidence for French Wine," Review of Economic Studies, Oxford University Press, vol. 79(2), pages 609-644.
  5. Robert C. Feenstra & John Romalis, 2012. "International Prices and Endogenous Quality," NBER Working Papers 18314, National Bureau of Economic Research, Inc.
  6. Crozet, Matthieu & Lalanne, Guy & Poncet, Sandra, 2013. "Wholesalers in international trade," European Economic Review, Elsevier, vol. 58(C), pages 1-17.
  7. David Byrne & Brian K. Kovak & Ryan Michaels, 2013. "Price and Quality Dispersion in an Offshoring Market: Evidence from Semiconductor Production Services," NBER Working Papers 19637, National Bureau of Economic Research, Inc.
  8. Benjamin Mandel, 2011. "The dynamics and differentiation of Latin American metal exports," Staff Reports 508, Federal Reserve Bank of New York.
  9. Naoto Jinji & Xingyuan Zhang & Shoji Haruna, 2010. "Trade Patterns and International Technology Spillovers:Theory and Evidence from Patent Citations," Discussion papers e-10-006, Graduate School of Economics Project Center, Kyoto University, revised Mar 2011.
  10. Zhi Yu, 2013. "Exchange rate pass-through, firm heterogeneity and product quality: a theoretical analysis," Globalization and Monetary Policy Institute Working Paper 141, Federal Reserve Bank of Dallas.

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