This paper examines the variation in export prices across firms, products and destinations to distinguish between alternative heterogeneous firm models of international trade. We establish five stylized facts using new data on the universe of Chinese trading firms. First, firms charging higher export prices earn larger revenues within each destination, have greater worldwide sales, and export to more markets. Second, firms that pay higher import prices set higher export prices, have greater worldwide sales, and export to more markets. Third, firms offer higher prices in larger, richer and more distant markets. Fourth, there is a positive correlation between export price and revenue across destinations within a firm. Finally, firms that export more to more countries pay a wider range of import prices and offer a broader menu of export prices. None of the heterogeneous firm models in the literature can match all of these patterns. Our results are instead consistent with quality differentiation across firms (stylized facts 1 and 2) and firms adjusting both quality and mark-ups across destinations in response to market toughness (stylized facts 3, 4 and 5).
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
15342.
Length: Date of creation: Sep 2009 Date of revision: Handle: RePEc:nbr:nberwo:15342
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Find related papers by JEL classification: F10 - International Economics - - Trade - - - General F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies F14 - International Economics - - Trade - - - Country and Industry Studies of Trade L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
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