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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, 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. Crozet, Matthieu & Head, Keith & Mayer, Thierry, 2009. "Quality sorting and trade: Firm-level evidence for French wine," CEPR Discussion Papers 7295, C.E.P.R. Discussion Papers.
  2. 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, vol. 112(6), pages 1384-1402, December.
  3. Hallak, Juan Carlos & Sivadasan, Jagadeesh, 2008. "Productivity, quality and exporting behavior under minimum quality constraints," MPRA Paper 24146, University Library of Munich, Germany.
  4. Johnson, Robert C., 2012. "Trade and prices with heterogeneous firms," Journal of International Economics, Elsevier, vol. 86(1), pages 43-56.
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Cited by:
  1. Békés, Gábor & Muraközy, Balázs & Harasztosi, Péter, 2011. "Firms and products in international trade: Evidence from Hungary," Economic Systems, Elsevier, vol. 35(1), pages 4-24, March.
  2. James Harrigan & Xiangjun Ma & Victor Shlychkov, 2011. "Export Prices of U.S. Firms," NBER Working Papers 17706, National Bureau of Economic Research, Inc.
  3. Francesco DI COMITE & Jacques-François THISSE & Hylke VANDENBUSSCHE, 2011. "Verti-zontal Differentiation in Monopolistic Competition," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2011046, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  4. Rollo, Valentina, 2012. "Determinants of Tanzanian export prices," Policy Research Working Paper Series 6225, The World Bank.
  5. F. Banu Demir, 2011. "Trading Tasks and Quality," Economics Series Working Papers 582, University of Oxford, Department of Economics.
  6. Gullstrand, Joakim & Olofsdotter, Karin & Thede, Susanna, 2011. "Markups and export pricing," Working Papers 2011:37, Lund University, Department of Economics.

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