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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:

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    2. 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.
    3. Flach, Lisandra & Unger, Florian, 2022. "Quality and gravity in international trade," Journal of International Economics, Elsevier, vol. 137(C).
    4. 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.
    5. Schmidt, Julia & Steingress, Walter, 2022. "No double standards: Quantifying the impact of standard harmonization on trade," Journal of International Economics, Elsevier, vol. 137(C).
    6. Flach, Lisandra, 2017. "A note on the isomorphism of heterogeneous firms models," Economics Letters, Elsevier, vol. 155(C), pages 24-27.

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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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