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Unit Values in International Trade and Product Quality

Author

Listed:
  • Chang Hong

    (Department of Economics, Clark University, Worcester, MA 02610.)

Abstract

Is the unit value of traded goods representative of quality? To answer this question, we analyze unit value with respect to exporter country’s capacity to export, which is determined by its production cost, tariff, and distance. The change in a country’s export unit value is decomposed into the components associated with pure term-of-trade effect, quality effect, distance effect, and production cost effect. Our empirical results confirm that tariff, distance, and wages all significantly affect the unit values. Furthermore, by comparing CIF and FOB unit values, we show that quality is an important contributor on driving up the unit values: exporters increase unit price to distant trading partners through quality upgrading. This "Washington apple effect" is much larger than the pure distance effect or production cost increase.

Suggested Citation

  • Chang Hong, 2015. "Unit Values in International Trade and Product Quality," Journal of Economic and Financial Studies (JEFS), LAR Center Press, vol. 3(3), pages 67-79, June.
    • Handle: RePEc:lrc:lareco:v:3:y:2015:i:3:p:67-79
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    Cited by:

    1. Jiehong Zhou & Yu Wang & Rui Mao, 2019. "Dynamic and spillover effects of USA import refusals on China's agricultural trade: Evidence from monthly data," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 65(9), pages 425-434.

    More about this item

    Keywords

    Distance; Quality; Unit value; Washington apple effect.;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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