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Quality change and other influences on measures of export prices of manufactured goods

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  • Lipsey, Robert E.

Abstract

Measures of long-term trends in world export prices for manufactured goods, and in the terms of trade between manufactured goods and primary products, are sensitive to many choices in methods for weighting indexes, base periods, and (most important) changes in quality. For example: 1) wieghting products by their importance in exports to developing countries, rather than by their importance in exports to all countries, reduces the estimated rate of increase in prices for manufactured goods by about 0.1 or 0.2 percentage points a year; 2) a shift in weights from those of an early year (1963) to those of a recent year (1986) reduces the rate of increase in prices by about a third of a percentage point a year; 3) export price indexes with weights of Japanese exports grow about 0.2 to 0.4 percentage points a year less than one weighted by the U.S. export composition, with the larger difference for indexes based on 1963 weights; 4) adjusting the price index for exports of machinery and transport equipment for quality changes not accounted for in the price indexes reduces the rate of increase for those products by about one percentage point a year, and that adjustment for only those products reduces the estimated rate of increase in prices for all manufactures by about half a percentage point a year. Conservative estimates of the bias in the most commonly used measure of export prices of manufactured products - the U.N. export unit value index for manufactures - suggest that this measure overstates the long-run rise in prices for manufactured goods by more than half a percentage point a year, probably one percentage point or more. If so, there has been no long-term trend toward the prices of manufactured goods rising faster that prices for primary products. However, no conceivable estimate of bias in measures of prices for manufactured goods would reverse the picture of declining relative prices for primary products in the 1980s.

Suggested Citation

  • Lipsey, Robert E., 1994. "Quality change and other influences on measures of export prices of manufactured goods," Policy Research Working Paper Series 1348, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1348
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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. Daniele Curzi & Lucia Pacca & Alessandro Olper, 2013. "Estimating Food Quality from Trade Data: An Empirical Assessment," LICOS Discussion Papers 33913, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    2. Rod Tyers & Qun Shi, 2007. "Demographic Change and Policy Responses: Implications for the Global Economy," The World Economy, Wiley Blackwell, vol. 30(4), pages 537-566, April.
    3. Anderson, Kym & Dimaranan, Betina V. & Hertel, Thomas W. & Martin, William J., 1997. "Asia-Pacific food markets and trade in 2005: a global, economy-wide perspective," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 41(1), March.
    4. Anderson, Kym, 1998. "Are resource-abundant economies disadvantaged?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 42(1), March.
    5. Franklin, Cynthia G.S. & Kim, Johnny S. & Ryan, Tiffany N. & Kelly, Michael S. & Montgomery, Katherine L., 2012. "Teacher involvement in school mental health interventions: A systematic review," Children and Youth Services Review, Elsevier, vol. 34(5), pages 973-982.
    6. Chen, John-Ren & Stocker, Herbert, 1997. "Composite commodities and the Prebisch-Singer thesis," World Development, Elsevier, vol. 25(11), pages 1863-1871, November.
    7. Ozdemir, Zeynel Abidin & Gokmenoglu, Korhan & Ekinci, Cagdas, 2013. "Persistence in crude oil spot and futures prices," Energy, Elsevier, vol. 59(C), pages 29-37.
    8. Rod Tyers & Jane Golley, 2006. "China's Growth to 2030: The Roles of Demographic Change and Investment Risk," ANU Working Papers in Economics and Econometrics 2006-461, Australian National University, College of Business and Economics, School of Economics.
    9. Rod Tyers & Jane Golley, 2006. "China's Growth to 2030: The Roles of Demographic Change and Investment Premia," PGDA Working Papers 1206, Program on the Global Demography of Aging.
    10. Anderson, Kym & Peng, Chao Yang, 1998. "Feeding and fueling China in the 21st century," World Development, Elsevier, vol. 26(8), pages 1413-1429, August.

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