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

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  • Benkovskis , Konstantins

    ()
    (BOFIT)

  • Wörz , Julia

    ()
    (BOFIT)

Abstract

The paper proposes a theoretical framework to explain gains and losses in export market shares by their 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.

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File URL: http://www.suomenpankki.fi/bofit_en/tutkimus/tutkimusjulkaisut/dp/Documents/2013/dp1813.pdf
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Bibliographic Info

Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 18/2013.

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Length: 48 pages
Date of creation: 12 Aug 2013
Date of revision:
Handle: RePEc:hhs:bofitp:2013_018

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Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
Phone: + 358 10 831 2268
Fax: + 358 10 831 2294
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Web page: http://www.suomenpankki.fi/bofit_en/
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Related research

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

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References

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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.
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  19. 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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  21. Benkovskis, Konstantins & Wörz, Julia, 2014. "What drives the market share changes? price versus non-price factors," Working Paper Series 1640, European Central Bank.
  22. Brunner, Hans-Peter & Cali, Massimiliano, 2006. "The dynamics of manufacturing competitiveness in South Asia: An analysis through export data," Journal of Asian Economics, Elsevier, vol. 17(4), pages 557-582, October.
  23. Rudolfs Bems & Robert C. Johnson, 2012. "Value-Added Exchange Rates," NBER Working Papers 18498, National Bureau of Economic Research, Inc.
  24. Martine Durand, 1986. "Method of Calculating Effective Exchange Rates and Indicators of Competitiveness," OECD Economics Department Working Papers 29, OECD Publishing.
  25. Soderbery, Anson, 2010. "Investigating the asymptotic properties of import elasticity estimates," Economics Letters, Elsevier, vol. 109(2), pages 57-62, November.
  26. 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.
  27. Konstantins Benkovskis & Julia Wörz, 2011. "How Does Quality Impact on Import Prices?," Working Papers 175, Oesterreichische Nationalbank (Austrian Central Bank).
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Cited by:
  1. Benkovskis, Konstantins & Wörz, Julia, 2014. "What drives the market share changes? price versus non-price factors," Working Paper Series 1640, European Central Bank.

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