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The Gains from Variety in the European Union

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  • Mohler, Lukas
  • Seitz, Michael

Abstract

Over the last decade, European Union members have experienced a dramatic increase in imports. This increase was accompanied by a strong growth in the number of imported goods and trading partners, indicating positive welfare gains for consumers via an extended set of consumption possibilities, as pointed out in the "New Trade Theory". In this paper, we apply the methodology developed by Feenstra (1994) and Broda and Weinstein (2006) to estimate structurally the gains from imported variety for the 27 countries of the European Union using highly disaggregated trade data at the HTS-8 level from Eurostat for the period of 1999 to 2008. Our results show that, within the European Union, especially “newer” and smaller member states exhibit high gains from newly imported varieties. Furthermore, we find that the vast majority of the gains from variety for consumers stem from intra-European Union trade.

Suggested Citation

  • Mohler, Lukas & Seitz, Michael, 2010. "The Gains from Variety in the European Union," Discussion Papers in Economics 11477, University of Munich, Department of Economics.
  • Handle: RePEc:lmu:muenec:11477
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    Cited by:

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    2. Lewrick, Ulf & Mohler, Lukas & Weder, Rolf, 2011. "International Trade in Variety and Domestic Production," Working papers 2011/03, Faculty of Business and Economics - University of Basel.
    3. Bajzik, Jozef & Havranek, Tomas & Irsova, Zuzana & Schwarz, Jiri, 2019. "Estimating the Armington Elasticity: The Importance of Data Choice and Publication Bias," MPRA Paper 95031, University Library of Munich, Germany.
    4. Irene Brambilla y Romina Tomé, 2014. "Imports and Welfare: Variety Losses of the Argentine Crisis of 2001-2002," Económica, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 60, pages 45-75, January-D.
    5. Lukas Mohler, 2011. "Variety Gains from Trade in Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 147(I), pages 45-70, March.
    6. Aspalter, Lisa, 2016. "Estimating Industry-level Armington Elasticities For EMU Countries," Department of Economics Working Paper Series 217, WU Vienna University of Economics and Business.
    7. Konstantins Benkovskis & Julia Wörz, 2014. "How does taste and quality impact on import prices?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(4), pages 665-691, November.
    8. Bajzik, Josef & Havranek, Tomas & Irsova, Zuzana & Schwarz, Jiri, 2020. "Estimating the Armington elasticity: The importance of study design and publication bias," Journal of International Economics, Elsevier, vol. 127(C).
    9. Breinlich, Holger & Dhingra, Swati & Ottaviano, Gianmarco I. P., 2016. "How have EU’s trade agreements impacted consumers?," LSE Research Online Documents on Economics 66434, London School of Economics and Political Science, LSE Library.
    10. Osbat, Chiara & Corbo, Vesna, 2013. "Trade adjustment in the European Union - a structural estimation approach," Working Paper Series 1535, European Central Bank.
    11. Harald Badinger, 2012. "Die Auswirkungen des Euro auf den Außenhandel der EU und Österreichs," FIW Policy Brief series 015, FIW.
    12. Yong-Seok Choi & Chin Hee Hahn, 2013. "Effects of Imported Intermediate Varieties on Plant Total Factor Productivity and Product Switching: Evidence from Korean Manufacturing," Asian Economic Journal, East Asian Economic Association, vol. 27(2), pages 125-143, June.
    13. Konstantins Benkovskis & Julia Woerz, 2012. "Evaluation of Non-price Competitiveness of Exports from Central, Eastern and Southeastern European Countries in the EU Market," Working Papers 2012/01, Latvijas Banka.
    14. Josef Bajzik & Tomas Havranek & Zuzana Irsova & Jiri Schwarz, 2019. "The Elasticity of Substitution between Domestic and Foreign Goods: A Quantitative Survey," Working Papers 2019/12, Czech National Bank.
    15. Konstantins Benkovskis & Julia Wörz, 2011. "How Does Quality Impact on Import Prices?," Working Papers 175, Oesterreichische Nationalbank (Austrian Central Bank).
    16. Ulf Lewrick & Lukas Mohler & Rolf Weder, 2016. "Trade in variety and domestic production: Evidence from US manufacturing," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 49(4), pages 1631-1657, November.
    17. Paul J.J. Welfens, 2015. "Transatlantisches Freihandelsabkommen EU-USA: Befunde zu den TTIP-Vorteilen und Anmerkungen zur TTIP-Debatte," EIIW Discussion paper disbei209, Universitätsbibliothek Wuppertal, University Library.
    18. Harald Badinger & Kemal Türkcan, 2014. "Currency Unions, Export Margins, and Product Differentiation: An Empirical Assessment for European Monetary Union," Review of International Economics, Wiley Blackwell, vol. 22(1), pages 13-30, February.
    19. Konstantins Benkovskis & Julia Wörz, 2012. "Non-Price Competitiveness Gains of Central, Eastern and Southeastern European Countries in the EU Market," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 27-47.
    20. Muhammad Ali & Uwe Cantner, 2020. "Economic diversification and human development in Europe," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 10(2), pages 211-235, June.

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    More about this item

    Keywords

    European Union; Welfare Gains from Trade; Trade in Variety;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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