Working Paper: NBER ID: w20143
Authors: Paulo Bastos; Joana Silva; Eric Verhoogen
Abstract: This paper examines the extent to which the destination of exports matters for the input prices paid by firms, using detailed customs and firm-product-level data from Portugal. We use exchange-rate movements as a source of variation in export destinations and find that exporting to richer countries leads firms to charge more for outputs and pay higher prices for inputs, other things equal. The results are supportive of the hypothesis that an exogenous increase in average destination income leads firms to raise the average quality of goods they produce and to purchase higher-quality inputs.
Keywords: Export Destinations; Input Prices; Quality Choice; Firm Behavior
JEL Codes: F1; L1; O1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Exporting to richer countries (F10) | Firms charge higher output prices (L11) |
| Exporting to richer countries (F10) | Firms pay higher input prices (D21) |
| Increases in average destination income (F40) | Higher prices for outputs (D49) |
| Increases in average destination income (F40) | Higher prices for inputs (L11) |