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What drives the market share changes? Price versus non-price factors

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  • Benkovskis, Konstantins
  • Wörz, Julia

Abstract

The paper proposes a theoretical framework for explaining gains and losses in export market shares by considering both price and non-price determinants. Starting from a demand-side model à la Armington (1969), we relax several restrictive assumptions to evaluate the contribution of unobservable changes in non-price factors (e.g. taste and quality), taking into account differences in elasticities of substitution across product markets. Using highly disaggregated annual trade data from UN Comtrade between 1996 and 2014, our empirical analysis reveals the dominant role of non-price factors in explaining the market share gains of BRIC countries and concurrent decline in the G7 share of world exports.

Suggested Citation

  • Benkovskis, Konstantins & Wörz, Julia, 2018. "What drives the market share changes? Price versus non-price factors," Structural Change and Economic Dynamics, Elsevier, vol. 45(C), pages 9-29.
  • Handle: RePEc:eee:streco:v:45:y:2018:i:c:p:9-29
    DOI: 10.1016/j.strueco.2017.12.001
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    Cited by:

    1. repec:eee:inecon:v:119:y:2019:i:c:p:150-168 is not listed on IDEAS
    2. Konstantins Benkovskis & Julia Woerz, 2014. ""Made in China" - How Does it Affect Measures of Competitiveness?," Working Papers 2014/04, Latvijas Banka.
    3. repec:aea:aecrev:v:107:y:2017:i:12:p:3835-74 is not listed on IDEAS
    4. Benkovskis Konstantins & Wörz Julia, 2018. "“Made in China”: how does it affect our understanding of global market shares?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 18(2), pages 1-26, June.
    5. repec:sgh:gosnar:y:2017:i:3:p:115-141 is not listed on IDEAS
    6. Styliani Christodoulopoulou & Oļegs Tkačevs, 2016. "Measuring the effectiveness of cost and price competitiveness in external rebalancing of euro area countries: What do alternative HCIs tell us?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 43(3), pages 487-531, August.
    7. repec:wfo:wstudy:60838 is not listed on IDEAS
    8. repec:zbw:zewexp:181906 is not listed on IDEAS
    9. Patureau, Lise & Poilly, Céline, 2019. "Reforms and the real exchange rate: The role of pricing-to-market," Journal of International Economics, Elsevier, vol. 119(C), pages 150-168.
    10. Monika Mrázová & J. Peter Neary, 2017. "Not So Demanding: Demand Structure and Firm Behavior," American Economic Review, American Economic Association, vol. 107(12), pages 3835-3874, December.
    11. repec:ecb:ecbops:2012163 is not listed on IDEAS
    12. repec:eco:journ2:2019-03-9 is not listed on IDEAS
    13. repec:spr:italej:v:4:y:2018:i:3:d:10.1007_s40797-018-0076-4 is not listed on IDEAS
    14. Osbat, Chiara & Zollino, Francesco & Aiello, Giovanni & Bluhm, Benjamin & Buelens, Christian & Cavallini, Flavia & Joseph, Andreas & Leonte, Alexandru & Lommatzsch, Kirsten & Momchilov, Georgi & Giord, 2015. "Compendium on the diagnostic toolkit for competitiveness," Occasional Paper Series 163, European Central Bank.
    15. E. Dhyne & C. Duprez & C. Fuss, 2015. "Main CompNet research results," Economic Review, National Bank of Belgium, issue iii, pages 103-116, December.
    16. Monica Amici & Emmanuele Bobbio & Roberto Torrini, 2018. "Patterns of Convergence (Divergence) in the Euro Area: Profitability Versus Cost and Price Indicators," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 4(3), pages 367-384, November.
    17. Enno Schröder, 2015. "Eurozone Imbalances: Measuring the Contribution of Expenditure Switching and Expenditure Volumes 1990-2013," Working Papers 1508, New School for Social Research, Department of Economics, revised Sep 2015.
    18. repec:eco:journ2:2018-06-29 is not listed on IDEAS

    More about this item

    Keywords

    Export market share decomposition; Non-price factors; Real effective exchange rate;

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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