The global geography of income and export patterns

This paper studies heterogeneity in the income elasticity of exports across origin countries. Combining insights of the economic geography literature and the home market effect literature, I argue that foreign consumer preferences drive product specifications and thus export patterns. I capture foreign consumer preferences with a multilateral income term, “quality market potential”. Analysing product-level trade flows with a gravity framework, I show that countries with high quality market potential export more to high-income destinations. The effect outweighs the standard home market effect of domestic per capita income, is strongest for developing countries, and works chiefly through the quantity margin.