Markups, Quality, and Trade Costs
47 Pages Posted: 24 Apr 2020
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Markups, Quality, and Trade Costs
Markups, Quality, and Trade Costs
Markups, Quality, and Trade Costs
Date Written: February 2020
Abstract
We investigate theoretically and empirically how exporters adjust their markups across destinations depending on bilateral distance, tariffs, and the quality of their exports. Under the assumption that trade costs are both ad valorem and per unit, our model predicts that markups rise with distance and fall with tariffs, but these effects are heterogeneous and are smaller in magnitude for higher quality exports. We find strong support for the predictions of the model using a unique data set of Argentinean firm-level wine exports combined with experts wine ratings as a measure of quality.
Keywords: Patterns of trade, Trade models, Demand elasticity, Financial statistics, Export prices, Distance, export unit values, heterogeneity, markups, quality, tariffs, trade costs., WP, trade cost, valorem, markup, export price, wine spectator
JEL Classification: F12, F14, F31, E01, F1, O24, C, F13
Suggested Citation: Suggested Citation