Working Paper: CEPR ID: DP15887
Authors: Helene Latzer; Florian Mayneris
Abstract: This paper analyses the relationship between a country’s income distribution and its exports’ unit values. Using bilateral export flows, we not only confirm the positive association between a country’s average income and its export unit values, but further identify a heterogeneous relationship with income inequality: we find a greater income spread to be associated with higher exports unit values in the case of poor countries only. These results are robust to the inclusion of controls for other determinants of export unit values, as well as to the use of alternative measures of income inequality and of the quality index. We finally discuss various theoretical rationalisations for this heterogeneous relationship between income inequality and the quality content of exports along the average income dimension, and show suggestive evidence that demand-side mechanisms can account for it at least partly.
Keywords: Income Distribution; Export Unit Values; Product Quality; Trade; Home Market Effect
JEL Codes: F12; L15; O15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| average income (D31) | export unit values (Y10) |
| income inequality (D31) | export unit values (Y10) |
| income distribution (D31) | quality content of exports (F14) |