The Desire for (Danish) Quality in High and Low Income Countries
AbstractWe estimate the correlation between firm prices and sales within a CN8 product-country-year market. We do this for every market to which at least 16 different Danish firms exported between 1999 and 2006. Approximately 60% of Danish exports are to markets in which the price is negatively correlated with sales. These correlations are significantly different across destination countries within product categories, but across years for a given product-destination pair. While some existing theories perform better than others at predicting these patterns, none can reconcile the variation across countries. To fully explain the patterns, We introduce a model in which the price-sales correlation can be interpreted as the market's desire for high quality goods over low cost substitutes. We discover an inverted U shaped relation between a country's desire for quality and its per capita GDP, which we term a Quality Kuznets Curve. This curve has a turning point around 10 000 Euros for Danish exports. The Quality Kuznets Curve appears both when looking across products and within products.
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Bibliographic InfoPaper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 11-06.
Length: 21 pages
Date of creation: Feb 2011
Date of revision:
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Web page: http://www.econ.ku.dk
More information through EDIRC
exports; firm heterogeneity; quality; productivity; Kuznets;
Find related papers by JEL classification:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-02-19 (All new papers)
- NEP-CIS-2011-02-19 (Confederation of Independent States)
- NEP-MIC-2011-02-19 (Microeconomics)
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.:
- Hallak, Juan Carlos & Sivadasan, Jagadeesh, 2011.
"Firms' Exporting Behavior under Quality Constraints,"
628, Research Seminar in International Economics, University of Michigan.
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- Juan Carlos Hallak & Peter K. Schott, 2011.
"Estimating Cross-Country Differences in Product Quality,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 126(1), pages 417-474.
- Juan Carlos Hallak & Peter K. Schott, 2008. "Estimating Cross-Country Differences in Product Quality," NBER Working Papers 13807, National Bureau of Economic Research, Inc.
- Hallak, Juan Carlos, 2006. "Product quality and the direction of trade," Journal of International Economics, Elsevier, vol. 68(1), pages 238-265, January.
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