Is Trade in Differentiated Goods Different?

Abstract

We examine the extent to which product differentiation affects the duration of US import trade relationships. Applying nonparametric and semiparametric techniques to highly disaggregated product level data we estimate the hazard rate is at least 25 percent higher for homogenous goods than for differentiated products. The results are not only highly robust but often are strengthened under alternative specifications. For instance, if we define trade relationships using industry level rather than product level data we find that the hazard rate is 46-56 percent higher for homogenous goods than for differentiated products. The survival ranking across product types holds across individual industries. We show that dropping the smallest trade relationships further accentuates the differences among product types. We also control for the possible measurement error in measuring spell lengths and the role of multiple spell relationships and find that in all cases the differences among products types are greater than in our benchmark analysis.

Keywords: Product Differentiation, Duration, International Trade

JEL Classification: F14, F19, C14, C41