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

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

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Title: Quality competition, Pricing-To-Market and Non-Tariff measures: A Unified Framework For the Analysis of Bilateral Unit Values
Author: Feinberg, Robert M.; Ferrantino, Michael; Deason, Lauren
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.
Description: Department of Economics, Working Paper Series, no. 2009-03. 37 pages.
URI: http://hdl.handle.net/1961/5763
Date: 2009-03


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