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Why Do Within Firm-Product Export Prices Differ across Markets?

  • Holger Gorg

    ()

    (Christian-Albrechts-University Kiel, CEPR)

  • Laszlo Halpern

    ()

    (Institute of Economics - Hungarian Academy of Sciences)

  • Balazs Murakozy

    ()

    (Institute of Economics - Hungarian Academy of Sciences)

In this paper we analyse the relationship between gravity variables and f.o.b. export unit values using Hungarian firm-product-destination data. By taking firm-product level selection into account we show that export unit values increase with distance even for particular firm-product combinations. This cannot be explained by models assuming firm- or even firm-product level selection and constant markups. The differences are important quantitatively; price differences in Hungarian exports between Germany and the US are about 30%. We also show that unit values are positively related to GDP/capita and that there is a weak negative relationship between unit values and market size. We propose two possible explanations: first, firms may export different quality versions of the same product to different markets. Secondly, directly exporting firms may capture part of the markups on transport costs in their f.o.b. prices.

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Paper provided by Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences in its series IEHAS Discussion Papers with number 1003.

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Length: 30 pages
Date of creation: Feb 2010
Date of revision:
Handle: RePEc:has:discpr:1003
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  1. David Hummels & Alexandre Skiba, 2002. "Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture," NBER Working Papers 9023, National Bureau of Economic Research, Inc.
  2. Matthieu Crozet & Keith Head & Thierry Mayer, 2012. "Quality Sorting and Trade: Firm-level Evidence for French Wine," Review of Economic Studies, Oxford University Press, vol. 79(2), pages 609-644.
  3. Gabor Bekes & Peter Harasztosi & Balazs Murakozy, 2009. "Firms and Products in International Trade: Data and Patterns for Hungary," IEHAS Discussion Papers 0919, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  4. Richard Kneller & Zhihong Yu, . "Quality Selection, Chinese Exports and Theories of Heterogeneous Firm Trade," Discussion Papers 08/44, University of Nottingham, GEP.
  5. Hallak, Juan Carlos & Sivadasan, Jagadeesh, 2008. "Productivity, quality and exporting behavior under minimum quality constraints," MPRA Paper 24146, University Library of Munich, Germany.
  6. Johnson, Robert C., 2012. "Trade and prices with heterogeneous firms," Journal of International Economics, Elsevier, vol. 86(1), pages 43-56.
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