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Prices and Market Shares in the International Machinery Trade

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  • Irving B. Kravis
  • Robert E. Lipsey
  • Dennis M. Bushe

Abstract

We use new international price measures we have developed for machinery and transport equipment to explain changes in exports and export shares of the United States, Germany, and Japan. The effects of relative price changes on export shares are fairly large, producing relative quantity changes that are 50 to 100 per cent and as much as 200 per cent greater than the price changes. The effects of price changes seem to stretch out over 3 to 5 years and possibly longer. We also find that delays between order and delivery may affect measures of export quantity and of its response to price. Equations for individual countries suggest that exports by the United States are most responsive to relative price changes and those of Germany least responsive. The income elasticities are very sensitive to the inclusion or exclusion of a time variable to measure "unexplained" trends in exports. A system of supply and demand equations is developed in which the supply of exports depends on a country's export and domestic prices for the same goods, as well as on its real income. The supply elasticities range from about 2% for Germany to over 7 for the United States, implying that firms switch easily between domestic sales and exports.

Suggested Citation

  • Irving B. Kravis & Robert E. Lipsey & Dennis M. Bushe, 1980. "Prices and Market Shares in the International Machinery Trade," NBER Working Papers 0521, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:0521
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    Cited by:

    1. McCorriston, Steve, 1992. "An Overview of the U.S. Competitiveness Debate," Occasional Papers 233090, Regional Research Project NC-194: Organization and Performance of World Food Systems.
    2. Mitchell H. Kellman & Yochanan Shachmurove, 2013. "Montenegrin Trade Specialization Index," PIER Working Paper Archive 13-045, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    3. Robert E. Lipsey & Linda Molinari & Irving B. Kravis, 1991. "Measures of Prices and Price Competitiveness in International Trade in Manufactured Goods," NBER Chapters, in: International Economic Transactions: Issues in Measurement and Empirical Research, pages 144-199, National Bureau of Economic Research, Inc.
    4. Horwitz, Eva Christina, 1981. "On Price Elasticities in Foreign Trade," Working Paper Series 51, Research Institute of Industrial Economics.
    5. Irving B. Kravis & Robert E. Lipsey, 1984. "Prices and Terms of Trade for Developed Country Exports of Manufactured Goods," International Economic Association Series, in: Béla Csikós-Nagy & Douglas Hague & Graham Hall (ed.), The Economics of Relative Prices, chapter 18, pages 415-453, Palgrave Macmillan.
    6. Robert E. Lipsey & Irving B. Kravis, 1986. "The Competitiveness and Comparative Advantage of U.S. Multinationals, 1957-1983," NBER Working Papers 2051, National Bureau of Economic Research, Inc.
    7. Mitchell Kellman & Mitchell Yochanan Shachmurove, 2012. "Trade Sophistication in a Transition Economy: Poland 1980–2009," Working Papers 64, Department of Applied Econometrics, Warsaw School of Economics.
    8. Mitchell H. Kellman & Yochanan Shachmurove, 2011. "Herfindahl-Hirschman Meets International Trade and Development Theories," Working Papers 50, Department of Applied Econometrics, Warsaw School of Economics.
    9. Irving B. Kravis & Robert E. Lipsey, 1982. "Towards an Explanation of National Price Levels," NBER Working Papers 1034, National Bureau of Economic Research, Inc.
    10. Mitchell H. Kellman & Yochanan Shachmurove, 2012. "The Ability to Adapt and Overcome Obstacles: Machinery Exports of Poland," PIER Working Paper Archive 12-004, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    11. Mitchell H. Kellman & Yochanan Shachmurove, 2010. "Adam Smith Meets an Index of Specialization in International Trade," PIER Working Paper Archive 10-029, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.

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