Measuring the Benefits of Product Variety with an Accurate Variety Set
Recent studies have used import data to assess the impact of foreign varieties on prices and welfare for a home country. The reliance on import data has a number of limitations. First, these papers rely on goods categories defined by the Harmonized System. Second, they define varieties using the Armington assumption that all imports coming from a particular country are one unique variety. Third, they ignore variety changes that may occur through foreign affiliate activity. In this paper, we revisit this literature by employing a detailed market-based data set on the U.S. automobile market that allows us to define goods varieties at a more precise level, as well as discern location of production and ownership of varieties. We show that estimated variety changes and their impacts on U.S. prices and welfare differ markedly for automobiles depending on whether one uses the standard import data or our more detailed market-based data. The import data and Armington assumption hide significant net variety change leading to a downward bias in the effects of net variety change, with implied welfare benefits only half what we find with our market-based data. We also show that the welfare gains from all foreign-owned varieties (both imported and from foreign affiliates) are well over 50% larger than that stemming from imported varieties alone.
|Date of creation:||May 2009|
|Date of revision:|
|Publication status:||published as Journal of International Economics Volume 82, Issue 2, November 2010, Pages 168–180 Cover image Measuring the benefits of foreign product variety with an accurate variety set ☆ Bruce A. Blonigena, Corresponding author contact information, E-mail the corresponding author, Anson Soderberyb, E-mail the corresponding author|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
- Jean Imbs & Isabelle Mejean, 2015.
American Economic Journal: Macroeconomics,
American Economic Association, vol. 7(3), pages 43-83, July.
- Jean Imbs & Isabelle Mejean, 2008. "Elasticity Optimism," EIEF Working Papers Series 0805, Einaudi Institute for Economics and Finance (EIEF), revised Mar 2008.
- Jean Imbs & Isabelle Méjean, 2009. "Elasticity optimism," Working Papers hal-00362403, HAL.
- Imbs, Jean & Mejean, Isabelle, 2009. "Elasticity Optimism," CEPR Discussion Papers 7177, C.E.P.R. Discussion Papers.
- International Monetary Fund, 2009. "Elasticity Optimism," IMF Working Papers 09/279, International Monetary Fund.
- Jean Imbs & Isabelle Mˆmjean, 2008. "Elasticity Optimism," Working Papers 242008, Hong Kong Institute for Monetary Research.
- Jean Imbs & Isabelle Mejean, 2015. "Elasticity Optimism," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01301577, HAL.
- Christian Broda & David E. Weinstein, 2006. "Globalization and the Gains From Variety," The Quarterly Journal of Economics, Oxford University Press, vol. 121(2), pages 541-585.
- 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.
- Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
- Goldberg, Pinelopi Koujianou, 1995. "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," Econometrica, Econometric Society, vol. 63(4), pages 891-951, July.
- Pinelopi K. Goldberg & Frank Verboven, 2001.
"Market Integration and Convergence to the Law of One Price: Evidence from the European Car Market,"
NBER Working Papers
8402, National Bureau of Economic Research, Inc.
- Goldberg, Pinelopi K. & Verboven, Frank, 2005. "Market integration and convergence to the Law of One Price: evidence from the European car market," Journal of International Economics, Elsevier, vol. 65(1), pages 49-73, January.
- Goldberg, Pinelopi & Verboven, Frank, 2001. "Market Integration and Convergence to the Law of One Price: Evidence from the European Car Market," CEPR Discussion Papers 2926, C.E.P.R. Discussion Papers.
- Amil Petrin, 2002. "Quantifying the Benefits of New Products: The Case of the Minivan," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 705-729, August.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:14956. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.