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Determinants of Tanzanian export prices

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  • Rollo, Valentina

Abstract

. This paper uses firm-level data to study the pricing-behavior of Tanzanian exporters. The important question of how exporting firms make pricing decisions has not received significant attention in the trade literature, which is more focused on factors that determine export flows. The results of the paper show that the free on board price of Tanzanian exports is differentiated both across exporters -- within product-destination pairs -- and across markets -- within firm-product pairs. Moreover, contrasting with existing evidence, price differentiation across destinations seems to be mainly relevant for homogenous goods. This result could indicate either that goods classified as homogeneous can potentially be differentiated by their intrinsic quality (such as coffee), or that firms charge different mark-ups in different markets. Although further work is needed to confirm what leads to price dispersion, allowing for the possibility that food products can be vertically differentiable amplifies the spectrum of existing opportunities for developing countries to exploit product differentiation and market niches. The study also discusses the implications of the empirical findings in light of the predictions of price and quality competition models, but finds that the results cannot be explained by a single trade model of quality or price competition.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6225.

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Date of creation: 01 Oct 2012
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Handle: RePEc:wbk:wbrwps:6225

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Keywords: Markets and Market Access; Economic Theory&Research; Access to Markets; Commodities; Emerging Markets;

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  1. Görg, Holger & Halpern, László & Muraközy, Balázs, 2010. "Why do within firm-product export prices differ across markets?," CEPR Discussion Papers 7708, C.E.P.R. Discussion Papers.
  2. Julien Martin, 2010. "Markups, Quality and Transport Costs," Working Papers 2010-17, Centre de Recherche en Economie et Statistique.
  3. Maurice Kugler & Eric Verhoogen, 2012. "Prices, Plant Size, and Product Quality," Review of Economic Studies, Oxford University Press, vol. 79(1), pages 307-339.
  4. Olivier Cadot & Leonardo Iacovone & Denisse Pierola & Ferdinand Rauch, 2011. "Success and Failure of African Exporters," CEP Discussion Papers dp1054, Centre for Economic Performance, LSE.
  5. Amit Khandelwal, 2009. "The Long and Short (of) Quality Ladders," NBER Working Papers 15178, National Bureau of Economic Research, Inc.
  6. Marc J. Melitz & Gianmarco I. P. Ottaviano, 2008. "Market Size, Trade, and Productivity," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 295-316.
  7. Kee, Hiau Looi & Nicita, Alessandro & Olarreaga, Marcelo, 2004. "Import Demand Elasticities and Trade Distortions," CEPR Discussion Papers 4669, C.E.P.R. Discussion Papers.
  8. Richard E. Baldwin & Tadashi Ito, 2008. "Quality competition versus price competition goods: An empirical classification," NBER Working Papers 14305, National Bureau of Economic Research, Inc.
  9. Hallak, Juan Carlos, 2006. "Product quality and the direction of trade," Journal of International Economics, Elsevier, vol. 68(1), pages 238-265, January.
  10. James E. Rauch, 1996. "Networks versus Markets in International Trade," NBER Working Papers 5617, National Bureau of Economic Research, Inc.
  11. Nicolas Berman & Philippe Martin & Thierry Mayer, 2012. "How do Different Exporters React to Exchange Rate Changes?," The Quarterly Journal of Economics, Oxford University Press, vol. 127(1), pages 437-492.
  12. 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.
  13. Narciso, Gaia & Smarzynska Javorcik, Beata, 2008. "Differentiated Products and Evasion of Import Tariffs," CEPR Discussion Papers 6804, C.E.P.R. Discussion Papers.
  14. Heiwai Tang & Yifan Zhang, 2012. "Quality Differentiation and Trade Intermediation," Development Working Papers 340, Centro Studi Luca d\'Agliano, University of Milano, revised 13 Nov 2012.
  15. repec:bla:restud:v:77:y:2010:i:4:p:1450-1476 is not listed on IDEAS
  16. Kalina Manova & Zhiwei Zhang, 2012. "Export Prices Across Firms and Destinations," The Quarterly Journal of Economics, Oxford University Press, vol. 127(1), pages 379-436.
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