scholarly journals International Prices and Endogenous Quality *

2014 ◽  
Vol 129 (2) ◽  
pp. 477-527 ◽  
Author(s):  
Robert C. Feenstra ◽  
John Romalis
Keyword(s):  
Monopolistic Competition ◽  
Terms Of Trade ◽  
Extensive Margin ◽  
Demand Side ◽  
Endogenous Quality ◽  
Traded Goods ◽  
Price Indexes ◽  
International Prices ◽  
Estimate Quality

Abstract The unit values of internationally traded goods are heavily influenced by quality. We model this in an extended monopolistic competition framework where, in addition to choosing price, firms simultaneously choose quality subject to nonhomothetic demand. We estimate quality and quality-adjusted price indexes for 185 countries over 1984–2011. Our estimates are less sensitive to assumptions about the extensive margin of firms than are purely “demand-side” estimates. We find that quality-adjusted prices vary much less across countries than do unit values and, surprisingly, the quality-adjusted terms of trade are negatively related to countries’ level of income.

scholarly journals Income Distribution, Factor Endowments, and Trade Revisited: The Role of Non-Tradable Goods

2017 ◽  
Vol 8 (1) ◽  
Author(s):  
Sebastian Galiani ◽  
Daniel Heymann ◽  
Nicolas E. Magud
Keyword(s):  
Income Distribution ◽  
Aggregate Demand ◽  
Terms Of Trade ◽  
Relative Price ◽  
Unskilled Labor ◽  
Distribution Factor ◽  
Traded Goods ◽  
International Prices ◽  
Tradable Goods ◽  
The Government

AbstractWe return to the traditional theme of the distributive consequences of international prices and trade policies, focusing on economies relatively abundant in natural resources with a large non-tradable-goods sector. Changes in international prices create an aggregate demand effect which impacts on the earnings of factors employed in the non-traded goods sector. We show that, in economies highly specialized in the production of tradable goods and where the import-competing sector is small, under standard assumptions, terms-of- trade shifts have a neutral effect on factor prices and thus lack distributive effects, quite differently from Stolper-Samuelson scenarios. In economies with sizable import-competing sectors and two “urban” productive factors (e.g. skilled and unskilled labor), changes in the terms of trade do induce distributional tensions through two channels: (i) the exogenous shift in the relative price of tradable goods, and (ii) the endogenous displacement of the demand for non-tradables. We illustrate how, according to the structure of the economy, different patterns of income distribution may arise. Next, we analyze the introduction of trade duties. Trade taxes change relative prices between tradable goods as a terms-of-trade shock does, but also introduce an additional demand mechanism, that depends on the use the government gives to the revenues. If the tax revenues are transferred back to the private sector, the resulting reallocation of spending favors those factors used intensively in the production of non-tradables.

scholarly journals Effect of International Competition on Firm Productivity and Market Power

2018 ◽  
pp. 462-492
Author(s):  
Jan De Loecker ◽  
Johannes Van Biesebroeck
Keyword(s):  
Market Power ◽  
Total Factor Productivity ◽  
Productive Efficiency ◽  
International Competition ◽  
Future Research ◽  
Extensive Margin ◽  
Demand Side ◽  
Factor Productivity ◽  
Relevant Market ◽  
Potential Impact

This chapter proposes a framework to evaluate the potential impact of international competition on firm performance and highlights two points. First, it is important to consider effects on productive efficiency and market power in an integrated framework. The popular concept of (revenue) total factor productivity (TFP) combines both effects, which can lead to problems of estimation and interpretation. Second, greater international competition enlarges the relevant market and can affect both the number and the type of competitors a firm faces, as well as the nature of competition. While it is possible that firms respond by adjusting their production operations, pricing adjustments are all but guaranteed. The chapter contrasts three estimation approaches that start, respectively, from the demand side, the product extensive margin, and the production side. It concludes with a few avenues for future research.

scholarly journals Trade Agreements and the Nature of Price Determination

2012 ◽  
Vol 102 (3) ◽  
pp. 470-476 ◽  
Author(s):  
Pol Antràs ◽  
Robert W Staiger
Keyword(s):  
Market Access ◽  
Trade Agreements ◽  
Terms Of Trade ◽  
Efficiency Frontier ◽  
Price Determination ◽  
Trade Theory ◽  
International Prices ◽  
International Price ◽  
Central Result ◽  
Deep Integration

According to the terms-of-trade theory, negotiations over tariffs alone, coupled with an effective market access preservation rule, can bring governments to the efficiency frontier. In this paper, we show that the nature of international price determination is important for this central result of the terms-of-trade theory. While the received theory assumes that international prices are fully disciplined by aggregate market clearing conditions, we show here that support for “shallow” integration is overturned, and instead a need for “deep” integration is suggested ? wherein direct negotiations occur over both border and behind-the-border policies ? if international prices are determined through bargaining.

scholarly journals A Monetary Model of Inflation for Bangladesh, 1974-1985

1989 ◽  
Vol 28 (2) ◽  
pp. 133-155 ◽  
Author(s):  
Md. Akhtar Hossain
Keyword(s):  
Price Level ◽  
International Market ◽  
Money Market ◽  
Terms Of Trade ◽  
Monetary Model ◽  
Money Stock ◽  
Real Money ◽  
The Real ◽  
Traded Goods ◽  
Monetary Approach

A model of inflation for Bangladesh is developed and estimated for the period 1974:2-1985 :4, in line with the monetary approach and based on the hypothesis that any disequilibrium in the real money-market adjusts itself through changes in the price level, but not instantaneously. Changes in the prices oftraded gooas in the international market, real permanent income, real money stock, one period lagged rate of inflation, and changes in the terms of trade between traded and non-traded goods are found to be the major determinants of inflation in Bangladesh.

Endogenous Vertical Differentiation, Variety, and the Unequal Gains from Trade

2021 ◽  
pp. 1-45
Author(s):  
Gunnar Heins
Keyword(s):  
Vertical Differentiation ◽  
Demand Estimation ◽  
Random Coefficients ◽  
Gains From Trade ◽  
Cost Of Living ◽  
Demand And Supply ◽  
Endogenous Quality ◽  
Structural Framework ◽  
Price Indexes ◽  
The Impact

Abstract How unequal are the gains from trade? This paper develops a structural framework to quantify the consequences of international trade on welfare of consumers across the income distribution, allowing for non-homothetic demand and endogenous quality choices by firms. Using random coefficients demand estimation techniques, I infer demand and supply parameters, as well as household-specific price indexes for more than 3,000 distinct industries and find the gains from trade to be moderately unequal except in wealthier and small economies. Further, not accounting for endogenous vertical differentiation would overstate the impact of trade on cost-of-living inequality by close to 50%.

Phylloxera and the Development of Scientific Viti-Viniculture

Creating Wine ◽  
2011 ◽  
Author(s):  
James Simpson
Keyword(s):  
Nineteenth Century ◽  
Large Scale ◽  
Demand Side ◽  
Transport Costs ◽  
Rapid Urbanization ◽  
Wine Making ◽  
Wine Consumption ◽  
International Prices ◽  
Per Capita ◽  
The Impact

This chapter examines the growth in wine consumption in the second half of the nineteenth century and shows the impact of phylloxera on the French market, and how the stimulus of higher international prices led to a wine boom in Spain. At the time, Europe's growers, winemakers, and merchants had to adapt to some important changes. On the demand side, the decline in transport costs produced by the railways, rapid urbanization, and rising incomes led to per capita wine consumption in France reaching more than 160 liters in the 1900s, and there were significant increases in other countries. The growth in consumption was all the more impressive given that the vine disease phylloxera vastatrix destroyed large areas of Europe's vineyards. In addition, the chapter discusses the development of scientific viticulture and wine making, and the appearance of large-scale wineries in the Midi and Algeria.

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