Working Paper: NBER ID: w12531
Authors: Yo Chul Choi; David Hummels; Chong Xiang
Abstract: We examine a generalized version of Flam and Helpman’s (1987) model of vertical differentiation that maps cross-country differences in income distributions to variations in import variety and price distributions. The theoretical predictions are examined and confirmed using micro data on income from the Luxemburg Income Study for 30 countries over 20 years. The pairs of importers whose income distributions look more similar have more export partners in common and more similar import price distributions. Similarly, the importers whose income distributions look more like the world buy from more exporters and have import price distributions that look more like the world.
Keywords: Import Variety; Quality Differentiation; Income Distribution
JEL Codes: D3; F1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Differences in income distributions (D31) | Differences in price distributions (D39) |
| Similar income distributions (D31) | Similar price distributions (D39) |
| Similar income distributions (D31) | Larger number of common exporters (F10) |
| Income distributions resembling the world (D31) | Import price distributions resembling the world (D39) |
| Income distribution similarity (D31) | Price distribution similarity (D39) |
| Income levels (D31) | Quality of goods imported (L15) |