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Domestic productivity and variety gains from trade


  • Ardelean, Adina
  • Lugovskyy, Volodymyr


We show theoretically and confirm empirically that domestic productivity has a significant impact on the demand for foreign varieties under the assumption that domestic and foreign varieties are imperfect substitutes. In particular, the demand for imported varieties is more elastic for countries with comparative advantage. For an average good facing a median trade barrier, doubling the importer-exporter relative export performance decreases the number of imported varieties by 17%. Our findings suggest that the variety gains estimates could be significantly biased if we ignore the substitutability between imported and domestic varieties.

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  • Ardelean, Adina & Lugovskyy, Volodymyr, 2010. "Domestic productivity and variety gains from trade," Journal of International Economics, Elsevier, vol. 80(2), pages 280-291, March.
  • Handle: RePEc:eee:inecon:v:80:y:2010:i:2:p:280-291

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    References listed on IDEAS

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    Cited by:

    1. Ulf Lewrick & Lukas Mohler & Rolf Weder, 2011. "International Trade in Variety and Domestic Production," Working papers 2011/03, Faculty of Business and Economics - University of Basel.
    2. Lugovskyy, Volodymyr; Skiba, Alexandre, 2010. "Transport Cost and Endogenous Quality Choice," CAGE Online Working Paper Series 17, Competitive Advantage in the Global Economy (CAGE).
    3. Lukas Mohler, 2011. "Variety Gains from Trade in Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 147(I), pages 45-70, March.
    4. Lukas Mohler & Michael Seitz, 2012. "The gains from variety in the European Union," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(3), pages 475-500, September.
    5. Wyatt J. Brooks & Pau S. Pujolàs, 2014. "Nonlinear Gravity," Department of Economics Working Papers 2014-15, McMaster University.
    6. João Barata R. B. Barroso, 2013. "Does trade shrink the measure of domestic firms?," Working Papers Series 332, Central Bank of Brazil, Research Department.
    7. Jaimovich, Esteban, 2012. "Import diversification along the growth path," Economics Letters, Elsevier, vol. 117(1), pages 306-310.
    8. Robert C. Feenstra & Philip A. Luck & Maurice Obstfeld & Katheryn N. Russ, 2014. "In Search of the Armington Elasticity," NBER Working Papers 20063, National Bureau of Economic Research, Inc.
    9. Carluccio, Juan & Fally, Thibault, 2013. "Foreign entry and spillovers with technological incompatibilities in the supply chain," Journal of International Economics, Elsevier, vol. 90(1), pages 123-135.
    10. Lugovskyy, Volodymyr & Skiba, Alexandre, 2016. "Positive and negative effects of distance on export prices," Journal of Economic Behavior & Organization, Elsevier, vol. 127(C), pages 155-181.
    11. Machado, José A.F. & Santos Silva, J.M.C. & Wei, Kehai, 2016. "Quantiles, corners, and the extensive margin of trade," European Economic Review, Elsevier, vol. 89(C), pages 73-84.
    12. Arnade, Carlos Anthony & Gopinath, Munisamy & Pick, Daniel H., 2011. "How Much Do Consumers Benefit from New Brand Introductions? The Case of Potato Chips," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 36(1), April.
    13. Lukas Mohler, 2012. "Variety Gains and the Extensive Margin of Trade," Working papers 2012/16, Faculty of Business and Economics - University of Basel.


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