Working Paper: CEPR ID: DP14204
Authors: Natalie Chen; Luciana Juvenal
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: distance; export; unit values; heterogeneity; markups; quality; tariff; trade costs; wine
JEL Codes: F12; F14; F31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| distance (R12) | markups (D43) |
| tariffs (F13) | markups (D43) |
| distance (R12) | prices (P22) |
| tariffs (F13) | prices (P22) |
| quality (L15) | markups (D43) |
| distance (R12) | markups (high quality) (L15) |
| tariffs (F13) | markups (high quality) (L15) |
| distance (R12) | markups (5th percentile quality) (L15) |
| tariffs (F13) | markups (5th percentile quality) (L15) |
| distance (R12) | markups (95th percentile quality) (L15) |
| tariffs (F13) | markups (95th percentile quality) (L15) |