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Product Quality and Firm Heterogeneity in International Trade

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  • Antoine Gervais

Abstract

I develop and implement a methodology for obtaining plant-level estimates of product quality from revenue and physical output data. Intuitively, firms that sell large quantities of output conditional on price are classified as high quality producers. I use this method to decompose cross-plant variation in price and export status into a quality and an efficiency margin. The empirical results show that prices are increasing in quality and decreasing in efficiency. However, selection into exporting is driven mainly by quality. The finding that changes in quality and efficiency have different impact on the firm's export decision is shown to be inconsistent with the traditional iceberg trade cost formulation and points to the importance of per unit transport costs.

Suggested Citation

  • Antoine Gervais, 2013. "Product Quality and Firm Heterogeneity in International Trade," Working Papers 13-08, Center for Economic Studies, U.S. Census Bureau.
  • Handle: RePEc:cen:wpaper:13-08
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    File URL: https://www2.census.gov/ces/wp/2013/CES-WP-13-08.pdf
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    References listed on IDEAS

    as
    1. Jan De Loecker, 2011. "Product Differentiation, Multiproduct Firms, and Estimating the Impact of Trade Liberalization on Productivity," Econometrica, Econometric Society, vol. 79(5), pages 1407-1451, September.
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    JEL classification:

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

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