IDEAS home Printed from https://ideas.repec.org/p/kud/kuiedp/1106.html
   My bibliography  Save this paper

The Desire for (Danish) Quality in High and Low Income Countries

Author

Listed:
  • Daniel X. Nguyen

    (Department of Economics, University of Copenhagen)

Abstract

We estimate the correlation between firm prices and sales within a CN8 product-country-year market. We do this for every market to which at least 16 different Danish firms exported between 1999 and 2006. Approximately 60% of Danish exports are to markets in which the price is negatively correlated with sales. These correlations are significantly different across destination countries within product categories, but across years for a given product-destination pair. While some existing theories perform better than others at predicting these patterns, none can reconcile the variation across countries. To fully explain the patterns, We introduce a model in which the price-sales correlation can be interpreted as the market's desire for high quality goods over low cost substitutes. We discover an inverted U shaped relation between a country's desire for quality and its per capita GDP, which we term a Quality Kuznets Curve. This curve has a turning point around 10 000 Euros for Danish exports. The Quality Kuznets Curve appears both when looking across products and within products.

Suggested Citation

  • Daniel X. Nguyen, 2011. "The Desire for (Danish) Quality in High and Low Income Countries," Discussion Papers 11-06, University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:kuiedp:1106
    as

    Download full text from publisher

    File URL: http://www.econ.ku.dk/english/research/publications/wp/dp_2011/1106.pdf/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Peter K. Schott, 2004. "Across-Product Versus Within-Product Specialization in International Trade," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(2), pages 647-678.
    2. Hallak, Juan Carlos, 2006. "Product quality and the direction of trade," Journal of International Economics, Elsevier, vol. 68(1), pages 238-265, January.
    3. Juan Carlos Hallak & Jagadeesh Sivadasan, 2009. "Firms' Exporting Behavior under Quality Constraints," Working Papers 09-13, Center for Economic Studies, U.S. Census Bureau.
    4. Juan Carlos Hallak & Peter K. Schott, 2011. "Estimating Cross-Country Differences in Product Quality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(1), pages 417-474.
    5. Bowen, Harry P & Leamer, Edward E & Sveikauskas, Leo, 1987. "Multicountry, Multifactor Tests of the Factor Abundance Theory," American Economic Review, American Economic Association, vol. 77(5), pages 791-809, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Julien Martin & Isabelle Méjean, 2011. "Low-wage countries' competition, reallocation across firms and the quality content of exports," PSE - G-MOND WORKING PAPERS halshs-00962485, HAL.
    2. Pablo Fajgelbaum & Gene M. Grossman & Elhanan Helpman, 2011. "Income Distribution, Product Quality, and International Trade," Journal of Political Economy, University of Chicago Press, vol. 119(4), pages 721-765.
    3. A. Auer, Raphael & Chaney, Thomas & Sauré, Philip, 2018. "Quality pricing-to-market," Journal of International Economics, Elsevier, vol. 110(C), pages 87-102.
    4. Raphael A. Auer, 2013. "Product Heterogeneity, Cross-Country Taste Differences, and the Consumption Home Bias," Working Papers 13.01, Swiss National Bank, Study Center Gerzensee.
    5. Emanuele Bacchiega & Antonio Minniti & Arsen Palestini, 2016. "Quality, distance and trade: A strategic approach," Papers in Regional Science, Wiley Blackwell, vol. 95, pages 165-191, March.
    6. Raphael Auer, 2009. "Product Heterogeneity, Within-Industry Trade Patterns, and the Home Bias of Consumption?," Working Papers 09.05, Swiss National Bank, Study Center Gerzensee.
    7. Amit Khandelwal, 2010. "The Long and Short (of) Quality Ladders," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(4), pages 1450-1476.
    8. Adriana Peluffo & Juan Ignacio Scasso, 2016. "Destination and source countries: Do they have a role on product quality?," Documentos de Trabajo (working papers) 16-10, Instituto de Economía - IECON.
    9. Benedetti Fasil, Cristiana & Borota, Teodora, 2013. "World trade patterns and prices: The role of productivity and quality heterogeneity," Journal of International Economics, Elsevier, vol. 91(1), pages 68-81.
    10. Chen, Natalie & Juvenal, Luciana, 2016. "Quality, trade, and exchange rate pass-through," Journal of International Economics, Elsevier, vol. 100(C), pages 61-80.
    11. Antoniades, Alexis, 2015. "Heterogeneous Firms, Quality, and Trade," Journal of International Economics, Elsevier, vol. 95(2), pages 263-273.
    12. Jennie Bai & Jia Guo & Benjamin R. Mandel, 2013. "Going global: markups and product quality in the Chinese art market," Staff Reports 614, Federal Reserve Bank of New York.
    13. Raphael A. Auer, 2009. "Taste Heterogeneity, Trade, and the Within-Industry Home Market Effect," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 145(IV), pages 387-403, December.
    14. Johnson, Robert C., 2012. "Trade and prices with heterogeneous firms," Journal of International Economics, Elsevier, vol. 86(1), pages 43-56.
    15. Charlotte Emlinger & Viola Lamani, 2020. "International trade, quality sorting and trade costs: the case of Cognac," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(3), pages 579-609, August.
    16. Christopher Hansman & Jonas Hjort & Gianmarco León-Ciliotta & Matthieu Teachout, 2020. "Vertical Integration, Supplier Behavior, and Quality Upgrading among Exporters," Journal of Political Economy, University of Chicago Press, vol. 128(9), pages 3570-3625.
    17. Maria Bas & Vanessa Strauss-Kahn, 2013. "Input-Trade Liberalization, Export Prices and Quality Upgrading," Working Papers hal-03460775, HAL.
    18. Jaimovich, Esteban & Merella, Vincenzo, 2015. "Love for quality, comparative advantage, and trade," Journal of International Economics, Elsevier, vol. 97(2), pages 376-391.
    19. Picard, Pierre M. & Okubo, Toshihiro, 2012. "Firms' locations under demand heterogeneity," Regional Science and Urban Economics, Elsevier, vol. 42(6), pages 961-974.
    20. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007. "Firms in International Trade," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 105-130, Summer.

    More about this item

    Keywords

    exports; firm heterogeneity; quality; productivity; Kuznets;
    All these keywords.

    JEL classification:

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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kud:kuiedp:1106. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Thomas Hoffmann (email available below). General contact details of provider: https://edirc.repec.org/data/okokudk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.