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Trade and prices with heterogeneous firms

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  • Johnson, Robert C.

Abstract

This paper estimates a heterogeneous firms trade model using sector level data on export participation, trade flows, and unit value prices in a multi-country setting. Examining within-exporter variation in prices across destinations, prices are increasing in the difficulty of entering the destination market in the majority of sectors. This pattern is consistent with models in which product quality is positively correlated with firm size. However, prices decrease in export thresholds in some large sectors, including autos, apparel, and electronics. I discuss the causes and consequences of this cross-sector heterogeneity. From an accounting perspective, selection into exporting explains a small fraction of overall price variation, but accounts for nearly half of variation in bilateral trade.

Suggested Citation

  • Johnson, Robert C., 2012. "Trade and prices with heterogeneous firms," Journal of International Economics, Elsevier, vol. 86(1), pages 43-56.
  • Handle: RePEc:eee:inecon:v:86:y:2012:i:1:p:43-56
    DOI: 10.1016/j.jinteco.2011.09.004
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    References listed on IDEAS

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    More about this item

    Keywords

    Heterogeneous firms; Export prices; Product quality;

    JEL classification:

    • F1 - International Economics - - Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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