IDEAS home Printed from https://ideas.repec.org/p/amu/wpaper/2009-03.html
   My bibliography  Save this paper

Quality competition, Pricing-To-Market and Non-Tariff measures: A Unified Framework For the Analysis of Bilateral Unit Values

Author

Listed:
  • Michael Ferrantino
  • Robert M. Feinberg
  • Lauren Deason

Abstract

This paper presents a unified framework for analyzing several factors that have been independently studied as determinants of unit values in international trade: product differentiation by quality (which suggests that unit values should be positively correlated with exporters' per capita income), pricing-to-market (which suggests they should be positively correlated with importers' per capita income), and non-tariff measures (which suggests that remaining residuals may contain evidence of trade barriers). On a large sample of bilateral unit values for 2005, we find that about 58 percent of all HS-6 products demonstrate both significant quality-ladder effects and pricing-to-market effects, with quality-ladder effects predominating in importance. Distance-related effects appearing directly in prices appear significantly larger than one would expect as a result of shipping margins. We also rank importers by the remaining unexplained variation in import prices, and examine whether these variations are plausibly related to non-tariff measures.

Suggested Citation

  • Michael Ferrantino & Robert M. Feinberg & Lauren Deason, 2009. "Quality competition, Pricing-To-Market and Non-Tariff measures: A Unified Framework For the Analysis of Bilateral Unit Values," Working Papers 2009-03, American University, Department of Economics.
    • Handle: RePEc:amu:wpaper:2009-03
    DOI: 10.17606/nrf3-d420
    as

    Download full text from publisher

    File URL: https://doi.org/10.17606/nrf3-d420
    File Function: First version, 2009
    Download Restriction: no
    File URL: https://libkey.io/10.17606/nrf3-d420?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    2. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72(6), pages 584-584.
    3. George Alessandria & Joseph P. Kaboski, 2011. "Pricing-to-Market and the Failure of Absolute PPP," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(1), pages 91-127, January.
    4. E. Baldwin, Richard & Ito, Tadashi, 2011. "Quality Competition Versus Price Competition Goods: An Empirical Classification," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 26, pages 110-135.
    5. Catherine Y. Co, 2007. "Factors That Account for the Large Variations in U.S. Export Prices," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 143(3), pages 557-582, October.
    6. Peter K. Schott, 2008. "The relative sophistication of Chinese exports [‘Manufacturing Earnings and Compensation in China’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 23(53), pages 6-49.
    7. Mayer, Thierry & Zignago, Soledad, 2006. "Notes on CEPII’s distances measures," MPRA Paper 26469, University Library of Munich, Germany.
    8. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    9. Lionel Fontagné & Guillaume Gaulier & Soledad Zignago, 2008. "Specialization across varieties and North–South competition [‘Multi-Product Firms and Trade Liberalization’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 23(53), pages 52-91.
    10. David Hummels, 2007. "Transportation Costs and International Trade in the Second Era of Globalization," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 131-154, Summer.
    11. Sven W. Arndt & J. David Richardson, 1987. "Real-Financial Linkages Among Open Economies," NBER Working Papers 2230, National Bureau of Economic Research, Inc.
    12. Gene M. Grossman & Elhanan Helpman, 1993. "Innovation and Growth in the Global Economy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262570971, April.
    13. David Hummels & Volodymyr Lugovskyy, 2006. "Are Matched Partner Trade Statistics a Usable Measure of Transportation Costs?," Review of International Economics, Wiley Blackwell, vol. 14(1), pages 69-86, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fedoseeva Svetlana, 2013. "(A)symmetry, (Non)linearity and Hysteresis of Pricing-To-Market: Evidence from German Sugar Confectionery Exports," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 11(1), pages 69-85, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michael J. Ferrantino & Robert M. Feinberg & Lauren Deason, 2012. "Quality Competition and Pricing-to-Market: A Unified Framework for the Analysis of Bilateral Unit Values," Southern Economic Journal, Southern Economic Association, vol. 78(3), pages 860-877, January.
    2. Michael J. Ferrantino & Robert M. Feinberg & Lauren Deason, 2012. "Quality Competition and Pricing-to-Market: A Unified Framework for the Analysis of Bilateral Unit Values," Southern Economic Journal, John Wiley & Sons, vol. 78(3), pages 860-877, January.
    3. Michael J. Ferrantino & Robert M. Feinberg & Lauren Deason, 2012. "Quality Competition and Pricing‐to‐Market: A Unified Framework for the Analysis of Bilateral Unit Values," Southern Economic Journal, John Wiley & Sons, vol. 78(3), pages 860-877, January.
    4. Angela Cheptea & Lionel Fontagné & Soledad Zignago, 2014. "European export performance," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(1), pages 25-58, February.
    5. Ito, Tadashi, 2012. "Revisiting the determinants of unit values," IDE Discussion Papers 356, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    6. Benedetti Fasil, Cristiana & Borota, Teodora, 2013. "World trade patterns and prices: The role of productivity and quality heterogeneity," Journal of International Economics, Elsevier, vol. 91(1), pages 68-81.
    7. Lashkaripour, Ahmad, 2020. "Weight-based quality specialization," Journal of International Economics, Elsevier, vol. 127(C).
    8. Charlotte Emlinger & Viola Lamani, 2020. "International trade, quality sorting and trade costs: the case of Cognac," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(3), pages 579-609, August.
    9. A. Auer, Raphael & Chaney, Thomas & Sauré, Philip, 2018. "Quality pricing-to-market," Journal of International Economics, Elsevier, vol. 110(C), pages 87-102.
    10. Mario Larch & Pehr-Johan Norbäck & Steffen Sirries & Dieter M. Urban, 2016. "Heterogeneous Firms, Globalisation and the Distance Puzzle," The World Economy, Wiley Blackwell, vol. 39(9), pages 1307-1338, September.
    11. Viroj Jienwatcharamongkhol, 2014. "Distance Sensitivity of Export: A Firm-Product Level Approach," Journal of Industry, Competition and Trade, Springer, vol. 14(4), pages 531-554, December.
    12. Hai Long Vo & Duc Hong Vo, 2023. "The purchasing power parity and exchange‐rate economics half a century on," Journal of Economic Surveys, Wiley Blackwell, vol. 37(2), pages 446-479, April.
    13. Benjamin Bridgman, 2008. "Energy Prices and the Expansion of World Trade," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 904-916, October.
    14. Crinò, Rosario & Ogliari, Laura, 2015. "Financial Frictions, Product Quality, and International Trade," CEPR Discussion Papers 10555, C.E.P.R. Discussion Papers.
    15. Mariko Klasing & Petros Milionis & Robert Zymek, 2015. "Gravity across Space and Time," Edinburgh School of Economics Discussion Paper Series 265, Edinburgh School of Economics, University of Edinburgh.
    16. Michelle Connolly & Kei-Mu Yi, 2015. "How Much of South Korea's Growth Miracle Can Be Explained by Trade Policy?," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(4), pages 188-221, October.
    17. Coşar, A. Kerem & Demir, Banu, 2018. "Shipping inside the box: Containerization and trade," Journal of International Economics, Elsevier, vol. 114(C), pages 331-345.
    18. Gan, Li & Hernandez, Manuel A. & Ma, Shuang, 2016. "The higher costs of doing business in China: Minimum wages and firms' export behavior," Journal of International Economics, Elsevier, vol. 100(C), pages 81-94.
    19. Patricia Sourdin & Richard Pomfret, 2012. "Trade Facilitation," Books, Edward Elgar Publishing, number 14596.
    20. Crucini, Mario J. & Yilmazkuday, Hakan, 2014. "Understanding long-run price dispersion," Journal of Monetary Economics, Elsevier, vol. 66(C), pages 226-240.

    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:amu:wpaper:2009-03. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Thomas Meal (email available below). General contact details of provider: http://www.american.edu/cas/economics/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.