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Quality and Gravity in International Trade

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  • Unger, Florian
  • Flach, Lisandra

Abstract

We show that the effect of fixed costs on international trade is lower in industries with a high degree of vertical product differentiation. We extend an international trade model by endogenous quality investmetns and use both aggregate trade data and firm-level data to estimate gravity equations of exports. Accounting for quality lowers the positive gains from trade and leads to more heterogeneous effects across industries compared to a trade model without quality.

Suggested Citation

  • Unger, Florian & Flach, Lisandra, 2017. "Quality and Gravity in International Trade," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168268, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc17:168268
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    Cited by:

    1. Bastos, Paulo & Silva, Joana, 2010. "The quality of a firm's exports: Where you export to matters," Journal of International Economics, Elsevier, vol. 82(2), pages 99-111, November.
    2. Flach, Lisandra & Unger, Florian, 2022. "Quality and gravity in international trade," Journal of International Economics, Elsevier, vol. 137(C).
    3. Jeffrey H. Bergstrand & Stephen R. Cray & Antoine Gervais, 2023. "Increasing Marginal Costs, Firm Heterogeneity,and the Gains from "Deep" International Trade Agreements," Cahiers de recherche 23-01, Departement d'économique de l'École de gestion à l'Université de Sherbrooke.
    4. Xianpu Xu & Yuchen Song, 2023. "Is There a Conflict between Automation and Environment? Implications of Artificial Intelligence for Carbon Emissions in China," Sustainability, MDPI, vol. 15(16), pages 1-22, August.
    5. Bergstrand, Jeffrey H. & Cray, Stephen R. & Gervais, Antoine, 2022. "Increasing Marginal Costs, Firm Heterogeneity, and the Gains from “Deep” International Trade Agreements," MPRA Paper 116736, University Library of Munich, Germany.
    6. Schmidt, Julia & Steingress, Walter, 2022. "No double standards: Quantifying the impact of standard harmonization on trade," Journal of International Economics, Elsevier, vol. 137(C).
    7. Flach, Lisandra, 2017. "A note on the isomorphism of heterogeneous firms models," Economics Letters, Elsevier, vol. 155(C), pages 24-27.
    8. Petr Polak & Nikol Polakova & Anna Tlusta, 2020. "How Bad Are Trade Wars? Evidence from Tariffs," Working Papers 2020/15, Czech National Bank.
    9. X.N. Iraki, 2018. "Is Kenya Facing East or West: An Empirical Analysis," International Business Research, Canadian Center of Science and Education, vol. 11(12), pages 134-144, December.
    10. Egger, Peter H. & Li, Jie & Wu, Han, 2023. "Firms’ entry choices across export products and markets, and the consequences of trade in an open economy: Evidence from China," Journal of Economic Behavior & Organization, Elsevier, vol. 209(C), pages 243-262.
    11. Bo Gao & Bin Qiu, 2023. "Income distribution and unequal gains from trade," The World Economy, Wiley Blackwell, vol. 46(1), pages 236-255, January.

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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