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

  • Benkovskis, Konstantins
  • Wörz, Julia

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 taste and quality, taking into account differences in elasticities of substitution across product markets. Using highly disaggregated trade data from UN Comtrade, our empirical analysis for the major world exporters (G7 and BRIC countries) reveals the dominant role of non-price factors in explaining the competitive gains of BRIC countries and concurrent decline in the G7’s share of world exports. JEL Classification: C43, F12, F14, L15

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Paper provided by European Central Bank in its series Working Paper Series with number 1640.

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Date of creation: Feb 2014
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Handle: RePEc:ecb:ecbwps:20141640
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  1. Tibor Besedes & Thomas J. Prusa, 2007. "The Role of Extensive and Intensive Margins and Export Growth," NBER Working Papers 13628, National Bureau of Economic Research, Inc.
  2. Felbermayr, Gabriel & Kohler, Wilhelm K., 2006. "Exploring the intensive and extensive margins of world trade," Munich Reprints in Economics 20610, University of Munich, Department of Economics.
  3. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-21, September.
  4. Vahagn Galstyan and Philip R. Lane, 2008. "External Imbalances and the Extensive Margin of Trade," The Institute for International Integration Studies Discussion Paper Series iiisdp259, IIIS.
  5. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-77, March.
  6. Benkovskis, Konstantins & Wörz, Julia, 2014. "What drives the market share changes? price versus non-price factors," Working Paper Series 1640, European Central Bank.
  7. Christian Broda & David Weinstein, 2004. "Globalization and the gains from variety," Staff Reports 180, Federal Reserve Bank of New York.
  8. Gloria Sheu, 2014. "Price, Quality, and Variety: Measuring the Gains from Trade in Differentiated Products," American Economic Journal: Applied Economics, American Economic Association, vol. 6(4), pages 66-89, October.
  9. Fu, Xiaolan & Kaplinsky, Raphael & Zhang, Jing, 2012. "The Impact of China on Low and Middle Income Countries’ Export Prices in Industrial-Country Markets," World Development, Elsevier, vol. 40(8), pages 1483-1496.
  10. Tamim Bayoumi & Jaewoo Lee & Sarma Jayanthi, 2006. "New Rates from New Weights," IMF Staff Papers, Palgrave Macmillan, vol. 53(2), pages 4.
  11. Benkovskis, Konstantins & Wörz, Julia, 2012. "Non-price competitiveness of exports from emerging countries," BOFIT Discussion Papers 19/2012, Bank of Finland, Institute for Economies in Transition.
  12. Schmitz, Martin & De Clercq, Maarten & Fidora, Michael & Lauro, Bernadette & Pinheiro, Cristina, 2012. "Revisiting the effective exchange rates of the euro," Occasional Paper Series 134, European Central Bank.
  13. Leamer, Edward E, 1981. "Is It a Demand Curve, or Is It a Supply Curve? Partial Identification through Inequality Constraints," The Review of Economics and Statistics, MIT Press, vol. 63(3), pages 319-27, August.
  14. Brunner, Hans-Peter & Cali, Massimiliano, 2006. "The dynamics of manufacturing competitiveness in South Asia: An analysis through export data," Journal of Asian Economics, Elsevier, vol. 17(4), pages 557-582, October.
  15. Gabor Pula & Daniel Santabárbara, 2012. "Is china climbing up the quality ladder?," Banco de Espa�a Working Papers 1209, Banco de Espa�a.
  16. Costas Arkolakis & Arnaud Costinot & Andrés Rodríguez-Clare, 2009. "New Trade Models, Same Old Gains?," NBER Working Papers 15628, National Bureau of Economic Research, Inc.
  17. Romer, Paul, 1994. "New goods, old theory, and the welfare costs of trade restrictions," Journal of Development Economics, Elsevier, vol. 43(1), pages 5-38, February.
  18. Rudolfs Bems & Robert C. Johnson, 2012. "Value-Added Exchange Rates," NBER Working Papers 18498, National Bureau of Economic Research, Inc.
  19. Menzie Chinn, 2006. "A Primer on Real Effective Exchange Rates: Determinants, Overvaluation, Trade Flows and Competitive Devaluation," Open Economies Review, Springer, vol. 17(1), pages 115-143, January.
  20. Konstantins Benkovskis & Julia Wörz, 2011. "How Does Quality Impact on Import Prices?," Working Papers 175, Oesterreichische Nationalbank (Austrian Central Bank).
  21. Imbs, Jean & Mejean, Isabelle, 2009. "Elasticity Optimism," CEPR Discussion Papers 7177, C.E.P.R. Discussion Papers.
  22. Soderbery, Anson, 2010. "Investigating the asymptotic properties of import elasticity estimates," Economics Letters, Elsevier, vol. 109(2), pages 57-62, November.
  23. repec:lmu:muenar:20646 is not listed on IDEAS
  24. David Hummels & Peter J. Klenow, 2005. "The Variety and Quality of a Nation's Exports," American Economic Review, American Economic Association, vol. 95(3), pages 704-723, June.
  25. Blonigen, Bruce A. & Soderbery, Anson, 2010. "Measuring the benefits of foreign product variety with an accurate variety set," Journal of International Economics, Elsevier, vol. 82(2), pages 168-180, November.
  26. Sato, Kazuo, 1976. "The Ideal Log-Change Index Number," The Review of Economics and Statistics, MIT Press, vol. 58(2), pages 223-28, May.
  27. Spilimbergo, Antonio & Vamvakidis, Athanasios, 2003. "Real effective exchange rate and the constant elasticity of substitution assumption," Journal of International Economics, Elsevier, vol. 60(2), pages 337-354, August.
  28. Juan Carlos Hallak & Peter K. Schott, 2011. "Estimating Cross-Country Differences in Product Quality," The Quarterly Journal of Economics, Oxford University Press, vol. 126(1), pages 417-474.
  29. Martine Durand, 1986. "Method of Calculating Effective Exchange Rates and Indicators of Competitiveness," OECD Economics Department Working Papers 29, OECD Publishing.
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