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Quality Change and other Influences on Measures of Export Prices of Manufactured Goods and the Terms of Trade between Primary Products and Manufacture

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  • Robert E. Lipsey

Abstract

Measures of long term trends in world export prices of manufactured goods and in the terms of trade between manufactured goods and primary products are sensitive to the choice of country weights and of base periods and, most important of all, the treatment of quality change. Later base periods and higher weights for rapidly growing exporters, such as Japan or the newly industrializing East Asian countries, are associated with lower estimates of the long-term increase in prices. Conservative estimates of the bias in the most commonly used measure of export prices of manufactured products, the United Nations export unit value index for manufactures, suggest that this measure overstates the long-run rise in manufactured goods prices by more than half of one per cent per year, probably one per cent or more. If this is the case, there has been no long term trend toward rising prices of manufactures relative to primary products. However, no conceivable estimate of bias in measures of manufactured goods prices would reverse the picture of declining relative primary product prices during the 1980s.

Suggested Citation

  • Robert E. Lipsey, 1994. "Quality Change and other Influences on Measures of Export Prices of Manufactured Goods and the Terms of Trade between Primary Products and Manufacture," NBER Working Papers 4671, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4671 Note: ITI
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    References listed on IDEAS

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    1. Dani Rodrik, 1994. "Industrial Organization and Product Quality: Evidence from South Korean and Taiwanese Exports," NBER Chapters,in: Empirical Studies of Strategic Trade Policy, pages 195-210 National Bureau of Economic Research, Inc.
    2. John Norsworthy & Show-Ling Jang, 1993. "Cost Function Estimation of Quality Change in Semiconductors," NBER Chapters,in: Price Measurements and Their Uses, pages 125-156 National Bureau of Economic Research, Inc.
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    Cited by:

    1. Joseph V. Balagtas & Matthew T. Holt, 2009. "The Commodity Terms of Trade, Unit Roots, and Nonlinear Alternatives: A Smooth Transition Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(1), pages 87-105.
    2. Robert C. Feenstra & Alan Heston & Marcel P. Timmer & Haiyan Deng, 2009. "Estimating Real Production and Expenditures across Nations: A Proposal for Improving the Penn World Tables," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 201-212, February.
    3. Joshua Aizenman, 2010. "Comment on "Exporting Deflation? Chinese Exports and Japanese Prices"," NBER Chapters,in: China's Growing Role in World Trade, pages 227-230 National Bureau of Economic Research, Inc.
    4. repec:dgr:rugggd:gd-95 is not listed on IDEAS
    5. A. Ninni & M. Raimondi & M. Zuppiroli, 2006. "The success of “Made in Italy”: an appraisal of quality-based competitiveness in food markets," Economics Department Working Papers 2006-EP10, Department of Economics, Parma University (Italy).
    6. Konstantin M. Wacker, 2011. "Do multinationals beat down developing countries' export prices? The impact of FDI on net barter terms of trade," Ibero America Institute for Econ. Research (IAI) Discussion Papers 211, Ibero-America Institute for Economic Research.
    7. Curzi, Daniele & Olper, Alessandro, 2012. "Export behavior of Italian food firms: Does product quality matter?," Food Policy, Elsevier, vol. 37(5), pages 493-503.
    8. Fleming, Euan M. & Fleming, Pauline, 2007. "Evidence on trends in the single factoral terms of trade in African agricultural commodity production," 81st Annual Conference, April 2-4, 2007, Reading University 7980, Agricultural Economics Society.
    9. Fleming, Euan M., 2007. "Use of the single factoral terms of trade to analyse agricultural production," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(2), June.

    More about this item

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • F10 - International Economics - - Trade - - - General

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