Trade and Prices with Heterogeneous Firms
AbstractThis paper estimates a heterogeneous firms trade model using disaggregate data on export values and prices. Prices contain information about differences in product quality across firms and countries that helps identify key mechanisms in the model. Examining within country variation in export prices across destination markets, I find that prices behave in a manner inconsistent with the benchmark model that ignores product quality differences across firms. In doing so, I demonstrate that export prices in most sectors are consistent with a model in which high productivity firms choose to produce high quality goods and charge high prices. Using model estimates, I also quantify the role of endogenous nontradability in accounting for variation in prices and trade flows, and construct an index of cross-country quality and variety within sectors.
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2008 Meeting Papers with number 244.
Date of creation: 2008
Date of revision:
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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