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Trade performances, product quality perceptions and the estimation of trade price-elasticities

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Author Info
Matthieu Crozet () (TEAM - Théories et Applications en Microéconomie et Macroéconomie - CNRS : UMR8059 - Université Panthéon-Sorbonne - Paris I)
Hélène Erkel-Rousse (TEAM - Théories et Applications en Microéconomie et Macroéconomie - CNRS : UMR8059 - Université Panthéon-Sorbonne - Paris I, DP - Direction de la Prévision - Ministère de l'Economie des Finances et de l'Industrie)

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Abstract

Traditional trade models ignoring the dimension of product quality generally lead to excessively low trade price elasticities. In this paper, we show that higher estimated trade price elasticities, more in conformity with theory, can be obtained by controlling product quality in trade equations. To do so, we have estimated trade equations including a product quality proxy derived from survey data. Our estimation results, based on panel data for the four main EU member States, confirm the part played by product quality in the estimation of trade price elasticities, at least for traditionally highly differentiated products.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00096826_v1.

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Date of creation: 2004
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Publication status: Published, Review of International Economics, 2004, 12, 1, 108-129
Handle: RePEc:hal:cesptp:halshs-00096826_v1

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Keywords: Trade performances ; trade equations ; trade price elasticities ; imperfect competition ; product differentiation ; quality ; unit value indices;

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References listed on IDEAS
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  1. 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. [Downloadable!] (restricted)
  2. Madsen, J.B., 1996. "On Errors in Variable Bias in Estimates of Export Price Elasticities," Discussion Paper Series In Economics And Econometrics 9647, Economics Division, School of Social Sciences, University of Southampton.
    Other versions:
  3. Amable, Bruno & Verspagen, Bart, 1995. "The Role of Technology in Market Shares Dynamics," Applied Economics, Taylor and Francis Journals, vol. 27(2), pages 197-204, February.
  4. Erkel-Rousse, H. & Mirza, D., 2000. "Import Price-Elasticities : Reconsidering the Evidence," Papiers d'Economie Mathématique et Applications 2000.52, Université Panthéon-Sorbonne (Paris 1).
    Other versions:
  5. Deyak, Timothy A. Deyak & Sawyer, W. Charles & Sprinkle, Richard L., 1997. "Changes in the Income and Price Elasticities of U.S. Import Demand," Economia Internazionale / International Economics, Camera di Commercio di Genova, vol. 50(2), pages 161-175.
  6. Goldstein, Morris & Khan, Mohsin S., 1985. "Income and price effects in foreign trade," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 20, pages 1041-1105 Elsevier. [Downloadable!] (restricted)
  7. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-81, August. [Downloadable!] (restricted)
  8. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
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  9. Hickman, Bert G. & Lau, Lawrence J., 1973. "Elasticities of substitution and export demands in a world trade model," European Economic Review, Elsevier, vol. 4(4), pages 347-380, December. [Downloadable!] (restricted)
  10. Antoine Magnier & Joël Toujas-Bernate, 1994. "Technology and trade: Empirical evidences for the major five industrialized countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 130(3), pages 494-520, September. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Jean-Marc Callois & Carl Gaigné, 2009. "Attitudes towards foreign products and welfare with capital mobility," Working Papers SMART - LERECO 200906, INRA UMR SMART. [Downloadable!]
  2. Ramos, Maria Priscila & Bureau, Jean Christophe & Salvatici, Luca, 2007. "Shipping the good beef out: EU trade liberalization to Mercosur exports," Working Papers 7215, TRADEAG - Agricultural Trade Agreements. [Downloadable!]
  3. Boumahdi, R. & Chaaban, J. & Thomas, A., 2004. "Import demand estimation with country and product effects : application of multi-way unbalanced panel data models to Lebanese imports," Economics Working Paper Archive (Toulouse) 200417, French Institute for Agronomy Research (INRA), Economics Laboratory in Toulouse (ESR Toulouse). [Downloadable!]
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