Markups Quality And Trade Costs
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Markups Quality And Trade Costs
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Author : Natalie Chen
language : en
Publisher: International Monetary Fund
Release Date : 2020-02-21
Markups Quality And Trade Costs written by Natalie Chen and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020-02-21 with Business & Economics categories.
We investigate theoretically and empirically how exporters adjust their markups across destinations depending on bilateral distance, tariffs, and the quality of their exports. Under the assumption that trade costs are both ad valorem and per unit, our model predicts that markups rise with distance and fall with tariffs, but these effects are heterogeneous and are smaller in magnitude for higher quality exports. We find strong support for the predictions of the model using a unique data set of Argentinean firm-level wine exports combined with experts wine ratings as a measure of quality.
Markups Quality And Trade Costs
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Author :
language : en
Publisher:
Release Date : 2019
Markups Quality And Trade Costs written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
Pass Through Of Trade Costs To U S Import Prices
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Author : HAKAN YILMAZKUDAY
language : en
Publisher:
Release Date : 2020
Pass Through Of Trade Costs To U S Import Prices written by HAKAN YILMAZKUDAY and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
This paper measures the pass-through of trade costs into U.S. import prices by using actual data on duties/tariffs and freight-related costs. The key innovation is to decompose the indirect effects of trade costs (on prices) into the effects on markups, quality and productivity while measuring/interpreting the pass-through of trade costs into welfare. Robust to the consideration of variable versus constant markups, there is evidence for incomplete pass-through, mostly due to the negative indirect effects of trade costs on marginal costs, suggesting that lower trade costs are associated with imports that have higher marginal costs; markups are affected relatively less. When the effects of trade costs on marginal costs are further decomposed into their components, the positive contribution of quality dominates in all cases, followed by the negative effects of productivity, suggesting that lower trade costs are associated with higher-quality imports that have been produced with lower productivity.
Constant Versus Variable Markups
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Author : Hakan Yilmazkuday
language : en
Publisher:
Release Date : 2016
Constant Versus Variable Markups written by Hakan Yilmazkuday and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
Understanding Markups In The Open Economy Under Bertrand Competition
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Author : Beatriz de Blas
language : en
Publisher:
Release Date : 2010
Understanding Markups In The Open Economy Under Bertrand Competition written by Beatriz de Blas and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.
The purpose of this paper is to understand the effects of endogenous markups and trade costs on the pricing behavior of exporters when firms are heterogeneous in productivity. Using new analytical distributions for markups under Bertrand competition, we uncover Ricardian patterns of export pricing that generate higher markups and export price volatility when industrialized countries sell to developing countries. These Ricardian patterns dissipate when developing countries move from bilateral to multilateral trade liberalization. The results arise from a form of price rigidity for exports that arises endogenously due to cut-throat competition, even though prices are otherwise perfectly flexible.
Quality Trade And Exchange Rate Pass Through
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Author : Natalie Chen
language : en
Publisher: International Monetary Fund
Release Date : 2014-03-12
Quality Trade And Exchange Rate Pass Through written by Natalie Chen and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-03-12 with Business & Economics categories.
This paper investigates theoretically and empirically the heterogeneous response of exporters to real exchange rate fluctuations due to product quality. Our model shows that the elasticity of demand perceived by exporters decreases with a real depreciation and with quality, leading to more pricing-to-market and to a smaller response of export volumes to a real depreciation for higher quality goods. We test the proposed theory using a highly disaggregated Argentinean firm-level wine export dataset between 2002 and 2009 combined with experts wine rankings as a measure of quality. The model predictions find strong support in the data and the results are robust to different measures of quality, samples, specifications, and to the potential endogeneity of quality.
Whats Is Firm Heterogeneity In Trade Models
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Author : Colin Hottman
language : en
Publisher:
Release Date : 2014
Whats Is Firm Heterogeneity In Trade Models written by Colin Hottman and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
Who S Getting Globalized The Size And Implications Of Intra National Trade Costs
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Author : David Atkin
language : en
Publisher:
Release Date : 2018
Who S Getting Globalized The Size And Implications Of Intra National Trade Costs written by David Atkin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
How large are the intra-national trade costs that separate consumers in remote locations of developing countries from global markets? What do those barriers imply for the intra-national incidence of the gains from falling international trade barriers? We develop a new methodology for answering these questions and apply it to newly collected CPI micro-data from Ethiopia and Nigeria (as well as to the US). In order to overcome three well-known challenges that arise when using price gaps to estimate trade costs, we: (i) work exclusively with a sample of goods that are identified at the barcode-level (to mitigate bias due to unobserved quality differences over space); (ii) collect novel data on the origin location of each product in our sample (to focus only on the pairs of locations that actually identify trade costs); and (iii) use estimates of cost pass-through to correct for mark-ups that potentially vary over space (to extract trade costs from price variation in an environment with potentially oligopolistic intermediaries). Without these corrections, we find that our estimates of the cost of distance would be biased downwards by a factor of approximately four. Our preferred estimates imply that the effect of log distance on trade costs within Ethiopia or Nigeria is four to five times larger than in the US. We also use our pass-through estimates to calculate the incidence of surplus increases due to falling world prices. We find that intermediaries capture the majority of the surplus, and that their share is even higher in distant locations, suggesting that remote consumers see only a small part of the gains from falling international trade barriers.
What Is Firm Heterogeneity In Trade Models
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Author : Colin Hottman
language : en
Publisher:
Release Date : 2014
What Is Firm Heterogeneity In Trade Models written by Colin Hottman and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with Business enterprises categories.
We estimate a structural model of heterogeneous multiproduct firms to examine the sources of firm heterogeneity emphasized in the recent trade and macro literatures. Using Nielsen barcode data on prices and sales, we estimate elasticities of substitution within and between firms, and use the estimated model to recover unobserved qualities, marginal costs and markups. We find that variation in firm quality and product scope explains at least four fifths of the variation in firm sales. Most firms are well approximated by the monopolistic competition benchmark of constant markups, but the largest firms that account for most of aggregate sales depart substantially from this benchmark. Although the output of multiproduct firms is differentiated, cannibalization is quantitatively important for the largest firms. This imperfect substitutability of products within firms, and the fact that larger firms supply more products than smaller firms, implies that standard productivity measures are not independent of demand system assumptions and probably dramatically understate the relative productivity of the largest firms.
Two Essays On Firm Entry And Pricing
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Author : Xiaochen Xie
language : en
Publisher:
Release Date : 2021
Two Essays On Firm Entry And Pricing written by Xiaochen Xie and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with categories.
Chapter 1: Re-exploring Markups and the Gains from International Trade This article investigates the welfare implication of trade liberalization, with variable markups, using evidence from the global smartphone industry. Higher trade exposure imposes forces on firms' markups from two directions: more competitive markets induce firms to lower their markups, while lower delivery costs motivate firms to lower their prices to an extent smaller than the decline in costs with the higher market demand and enhance their markups. To date, most structural work in international trade has ignored the potential welfare gains of trade liberalization through the markup channel by alleviating price distortions or has otherwise failed to track both of the directional forces that international trade imposes on markups. Accounting for the smartphone markets of 40 countries, I build a model of supply and demand in which both firms' product portfolio and pricing strategies are endogenous. I find that an increase in tariff rates would prompt mostly low-quality goods producers to exit the affected markets while increasing the price-to-cost margins of the remaining low-quality goods producers; meanwhile, the markups of the high-quality goods incumbents vary only little, or even reducing slightly to offset the market demand slump that the higher costs generate. My results suggest that if researchers only focus on the loss of variety when examining the impacts of higher trade barriers following traditional methods of measurement without paying attention to the markup channel, then the average consumer surplus loss could be underestimated by 7% to 10% through the price distortion. Chapter 2: Export Dynamics This paper studies firms' export dynamics using evidence from the global cellphone industry. Exporters tend to enter foreign markets that are geographically close or culturally similar to their previous export destinations. Most structural work of international trade has ignored firms' sequential export decisions across countries when estimating entry costs or has failed to build a framework in which firms' export-dynamic actions can be tractable or in which entry costs can be accurately estimated. I build a dynamic model in which firms first sequentially choose global regions for penetration and then spread out over the countries in the regions. I estimate firms' region- and country-level entry sunk costs for starting a business and the country-specific fixed costs for maintaining operation. I find that entering a new region with consumer characteristics similar to the previous export regions could reduce the entry costs as drastically as 81%. Relatedly, adding countries after penetrating a region would incur much lower entry costs than the costs associated with entering the first country in that region. Stricter trade regulation in large countries, such as the G7 group, would also reduce importers' entry margins and their trade value in the surrounding, smaller European countries. Moreover, conditional on the same productivity level, the geographical location of a firm's headquarters could determine as much as 70% of the variation in global expansion and sales. My model primitives predict a world with more advanced infrastructure, which can shorten the world's distance by half, could reduce delivery cost, and greatly enhance the consumer surplus in the mobile phone market by 1.3% to 3.87%. Compared to a static model, my dynamic model reports a gradual and less volatile increase in consumer surplus and market competition.