Working Paper: NBER ID: w15342
Authors: Kalina Manova; Zhiwei Zhang
Abstract: This paper establishes six stylized facts about firms' export prices using detailed customs data on the universe of Chinese trade flows. First, across firms selling a given product, exporters that charge higher prices earn greater revenues in each destination, have bigger worldwide sales, and enter more markets. Second, firms that export more, that enter more markets and that charge higher export prices import more expensive inputs. Third, across destinations within a firm-product, firms set higher prices in richer, larger, bilaterally more distant and overall less remote countries. Fourth, across destinations within a firm-product, firms earn bigger revenues in markets where they set higher prices. Fifth, across firms within a product, exporters with more destinations offer a wider range of export prices. Finally, firms that export more, that enter more markets and that offer a wider range of export prices pay a wider range of input prices and source inputs from more origin countries. We propose that trade models should incorporate two features to rationalize these patterns in the data: more successful exporters use higher-quality inputs to produce higher-quality goods (stylized facts 1 and 2), and firms vary the quality of their products across destinations by using inputs of different quality levels (stylized facts 3, 4, 5 and 6).
Keywords: export prices; firm heterogeneity; international trade; quality differentiation
JEL Codes: F10; F12; F14; L11; L16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher export prices (F14) | greater revenues (H27) |
| higher export prices (F14) | bigger worldwide sales (F61) |
| higher export prices (F14) | enter more markets (L17) |
| export more and charge higher prices (F10) | import more expensive inputs (F16) |
| destination attributes (Z30) | export pricing behavior (L11) |
| higher prices in richer countries (F61) | higher export prices (F14) |
| export more and offer a wider range of prices (F10) | pay a wider range of input prices (L11) |
| export more (F10) | source inputs from more origin countries (F29) |