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Export Destinations and Input Prices

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  • Paulo Bastos
  • Joana Silva
  • Eric Verhoogen

Abstract

This paper examines the relationship between the destination of exports and the input prices paid by firms, using detailed customs and firm-product-level data from Portugal. Both ordinary least squares regressions and an instrumental-variable strategy using exchange-rate movements (interacted with indicators for initial exports) as a source of variation in destinations indicate that exporting to richer countries leads firms to pay higher prices for inputs, other things equal. The results are supportive of what we call the income-based quality-choice channel: selling to richer destinations leads firms to raise the average quality of goods they produce and to purchase higher-quality inputs.

Suggested Citation

  • Paulo Bastos & Joana Silva & Eric Verhoogen, 2018. "Export Destinations and Input Prices," American Economic Review, American Economic Association, vol. 108(2), pages 353-392, February.
  • Handle: RePEc:aea:aecrev:v:108:y:2018:i:2:p:353-92
    Note: DOI: 10.1257/aer.20140647
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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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