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Why Do Within Firm-Product Export Prices Differ across Markets?

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Author Info

  • Holger Gorg

    ()
    (Christian-Albrechts-University Kiel, CEPR)

  • Laszlo Halpern

    ()
    (Institute of Economics - Hungarian Academy of Sciences)

  • Balazs Murakozy

    ()
    (Institute of Economics - Hungarian Academy of Sciences)

Abstract

In this paper we analyse the relationship between gravity variables and f.o.b. export unit values using Hungarian firm-product-destination data. By taking firm-product level selection into account we show that export unit values increase with distance even for particular firm-product combinations. This cannot be explained by models assuming firm- or even firm-product level selection and constant markups. The differences are important quantitatively; price differences in Hungarian exports between Germany and the US are about 30%. We also show that unit values are positively related to GDP/capita and that there is a weak negative relationship between unit values and market size. We propose two possible explanations: first, firms may export different quality versions of the same product to different markets. Secondly, directly exporting firms may capture part of the markups on transport costs in their f.o.b. prices.

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Bibliographic Info

Paper provided by Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences in its series IEHAS Discussion Papers with number 1003.

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Length: 30 pages
Date of creation: Feb 2010
Date of revision:
Handle: RePEc:has:discpr:1003

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Keywords: export; price; selection; Hungary;

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References

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  1. Hallak, Juan Carlos & Sivadasan, Jagadeesh, 2008. "Productivity, quality and exporting behavior under minimum quality constraints," MPRA Paper 24146, University Library of Munich, Germany.
  2. Crozet, Matthieu & Head, Keith & Mayer, Thierry, 2009. "Quality sorting and trade: Firm-level evidence for French wine," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7295, C.E.P.R. Discussion Papers.
  3. David Hummels & Alexandre Skiba, 2004. "Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 112(6), pages 1384-1402, December.
  4. Gábor Békés & Péter Harasztosi & Balázs Muraközy, 2009. "Firms and Products in International Trade: Data and Patterns for Hungary," CeFiG Working Papers, Center for Firms in the Global Economy 9, Center for Firms in the Global Economy, revised 12 Oct 2009.
  5. Richard Kneller & Zhihong Yu, . "Quality Selection, Chinese Exports and Theories of Heterogeneous Firm Trade," Discussion Papers 08/44, University of Nottingham, GEP.
  6. Johnson, Robert C., 2012. "Trade and prices with heterogeneous firms," Journal of International Economics, Elsevier, Elsevier, vol. 86(1), pages 43-56.
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Cited by:
  1. F. Banu Demir, 2011. "Trading Tasks and Quality," Economics Series Working Papers 582, University of Oxford, Department of Economics.
  2. Maria Bas & Vanessa Strauss-Kahn, 2013. "Input-Trade Liberalization, Export Prices and Quality Upgrading," Sciences Po Economics Discussion Papers 2013-13, Sciences Po Departement of Economics.
  3. Anna Ray & Antoine Vatan, 2013. "Demand for Luxury Goods in a World of Income Disparities," PSE - G-MOND WORKING PAPERS hal-00959398, HAL.
  4. Békés, Gábor & Muraközy, Balázs & Harasztosi, Péter, 2011. "Firms and products in international trade: Evidence from Hungary," Economic Systems, Elsevier, Elsevier, vol. 35(1), pages 4-24, March.
  5. Gullstrand, Joakim & Olofsdotter, Karin & Thede, Susanna, 2011. "Markups and export pricing," Working Papers, Lund University, Department of Economics 2011:37, Lund University, Department of Economics.
  6. James Harrigan & Xiangjun Ma & Victor Shlychkov, 2011. "Export Prices of U.S. Firms," Working Papers 11-42, Center for Economic Studies, U.S. Census Bureau.
  7. Maria Bas & Vanessa Strauss-Kahn, 2013. "Input-Trade Liberalization, Export Prices and Quality Upgrading," Sciences Po publications 2013-13, Sciences Po.
  8. Martin, Julien, 2012. "Markups, quality, and transport costs," European Economic Review, Elsevier, Elsevier, vol. 56(4), pages 777-791.
  9. Francesco Di Comite & Jacques-François Thisse & Hylke Vandenbussche, 2011. "Verti-zontal differentiation in monopolistic competition," Working Paper Research, National Bank of Belgium 216, National Bank of Belgium.
  10. Rollo, Valentina, 2012. "Determinants of Tanzanian export prices," Policy Research Working Paper Series 6225, The World Bank.
  11. Daria Pus & László Mátyás & Cecilia Hornok, 2013. "Modelling Firm-Product Level Trade: A Multi-Dimensional Random Effects Panel Data Approach," CEU Working Papers, Department of Economics, Central European University 2013_2, Department of Economics, Central European University, revised 08 May 2013.
  12. repec:hal:cesptp:hal-00959398 is not listed on IDEAS

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