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Positive and negative effects of distance on export prices

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  • Lugovskyy, Volodymyr
  • Skiba, Alexandre

Abstract

In a model of international trade with non-homothetic preferences and endogenous product quality where some firms choose common quality for all destinations, we find a novel effect of distance on quality and export prices. This effect is either positive or negative depending on whether the importer is, respectively, poor or rich relative to the other export destinations. Interestingly, the effect goes against the well-documented Alchian–Allen effect if the importer is relatively rich. This is because greater distance to relatively rich countries decreases the demand for quality. The estimated effects of distance in a sample of product-level imports to nine Latin American countries and the United States support our theory.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:jeborg:v:127:y:2016:i:c:p:155-181
    DOI: 10.1016/j.jebo.2016.04.018
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    Cited by:

    1. Chen, Natalie & Juvenal, Luciana, 2019. "Markups, Quality, and Trade Costs," CAGE Online Working Paper Series 446, Competitive Advantage in the Global Economy (CAGE).
    2. Bastos, Paulo & Silva, Joana, 2010. "The quality of a firm's exports: Where you export to matters," Journal of International Economics, Elsevier, vol. 82(2), pages 99-111, November.
    3. Latzer, Hélène & Mayneris, Florian, 2021. "Average income, income inequality and export unit values," Journal of Economic Behavior & Organization, Elsevier, vol. 185(C), pages 625-646.
    4. Miao, Zhuang & Li, Yifan, 2017. "Trade Scopes across Destinations: Evidence from Chinese Firm," MPRA Paper 80863, University Library of Munich, Germany, revised 15 Aug 2017.
    5. Qianhui Gao & Shoichi Ito & Kolawole Ogundari & Hisamitsu Saito, 2016. "Evaluating Welfare Effects of Rice Import Quota in Japan: Based on Measuring Non-Tariff Barriers of SBS Rice Imports," Sustainability, MDPI, Open Access Journal, vol. 8(8), pages 1-13, August.
    6. Adriana Peluffo & Juan Ignacio Scasso, 2016. "Destination and source countries: Do they have a role on product quality?," Documentos de Trabajo (working papers) 16-10, Instituto de Economia - IECON.
    7. repec:mje:mjejnl:v:12:y:2017:i:2:p:141-150 is not listed on IDEAS
    8. Li, Yifan & Miao, Zhuang, 2019. "Effect of Exchange Rate Volatility on Imports: Evidences from Chinese Firms," MPRA Paper 95088, University Library of Munich, Germany.
    9. Serhiy Moroz & Khabibullo Pirmatov & Elena Horska & Ludmila Nagyova & Zuzana Polakova, 2017. "The Effect of Selected Economic Indicators on Export of Goods of Regions of Ukraine," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 13(2), pages 141-150.

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