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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
Date of revision:
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. Amit Khandelwal, 2009. "The Long and Short (of) Quality Ladders," NBER Working Papers 15178, National Bureau of Economic Research, Inc.
  2. Baldwin, Richard & Ito, Tadashi, 2008. "Quality Competition Versus Price Competition Goods: An Empirical Classification," CEPR Discussion Papers 6952, C.E.P.R. Discussion Papers.
  3. David Hummels & Alexandre Skiba, 2002. "Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture," NBER Working Papers 9023, National Bureau of Economic Research, Inc.
  4. Maurice Kugler & Eric A. Verhoogen, 2007. "Product Quality at the Plant Level: Plant Size, Exports, Output Prices and Input Prices in Colombia," Discussion Papers 0708-12, Columbia University, Department of Economics.
  5. Javorcik, Beata S. & Narciso, Gaia, 2008. "Differentiated products and evasion of import tariffs," Journal of International Economics, Elsevier, vol. 76(2), pages 208-222, December.
  6. Olivier Cadot & Leonardo Iacovone & Denisse Pierola & Ferdinand Rauch, 2011. "Success and Failure of African Exporters," CEP Discussion Papers dp1054, Centre for Economic Performance, LSE.
  7. 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.
  8. Martin, Julien, 2012. "Markups, quality, and transport costs," European Economic Review, Elsevier, vol. 56(4), pages 777-791.
  9. Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," NBER Working Papers 11393, National Bureau of Economic Research, Inc.
  10. 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.
  11. Julien Martin, 2009. "Spatial Price Discrimination in International Markets," Working Papers 2009-21, CEPII research center.
  12. Hallak, Juan Carlos, 2006. "Product quality and the direction of trade," Journal of International Economics, Elsevier, vol. 68(1), pages 238-265, January.
  13. Holger Gorg & Laszlo Halpern & Balazs Murakozy, 2010. "Why Do Within Firm-Product Export Prices Differ across Markets?," IEHAS Discussion Papers 1003, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  14. Kee, Hiau Looi & Nicita, Alessandro & Olarreaga, Marcelo, 2004. "Import Demand Elasticities and Trade Distortions," CEPR Discussion Papers 4669, C.E.P.R. Discussion Papers.
  15. repec:bla:restud:v:77:y:2010:i:4:p:1450-1476 is not listed on IDEAS
  16. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
  17. 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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