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Markups Quality And Trade Costs
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Book Synopsis Markups, Quality, and Trade Costs by : Natalie Chen
Download or read book Markups, Quality, and Trade Costs written by Natalie Chen and published by International Monetary Fund. This book was released on 2020-02-21 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Markups, Quality, and Trade Costs by :
Download or read book Markups, Quality, and Trade Costs written by and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Trade Costs and Markups by : Alexander McQuoid
Download or read book Trade Costs and Markups written by Alexander McQuoid and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Pass-Through of Trade Costs to U.S. Import Prices by : HAKAN YILMAZKUDAY
Download or read book Pass-Through of Trade Costs to U.S. Import Prices written by HAKAN YILMAZKUDAY and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper measures the pass-through of trade costs into U.S. import prices by using actual data on duties/tariffs and freight-related costs. The key innovation is to decompose the indirect effects of trade costs (on prices) into the effects on markups, quality and productivity while measuring/interpreting the pass-through of trade costs into welfare. Robust to the consideration of variable versus constant markups, there is evidence for incomplete pass-through, mostly due to the negative indirect effects of trade costs on marginal costs, suggesting that lower trade costs are associated with imports that have higher marginal costs; markups are affected relatively less. When the effects of trade costs on marginal costs are further decomposed into their components, the positive contribution of quality dominates in all cases, followed by the negative effects of productivity, suggesting that lower trade costs are associated with higher-quality imports that have been produced with lower productivity.
Book Synopsis Quality, Trade, and Exchange Rate Pass-Through by : Natalie Chen
Download or read book Quality, Trade, and Exchange Rate Pass-Through written by Natalie Chen and published by International Monetary Fund. This book was released on 2014-03-12 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates theoretically and empirically the heterogeneous response of exporters to real exchange rate fluctuations due to product quality. Our model shows that the elasticity of demand perceived by exporters decreases with a real depreciation and with quality, leading to more pricing-to-market and to a smaller response of export volumes to a real depreciation for higher quality goods. We test the proposed theory using a highly disaggregated Argentinean firm-level wine export dataset between 2002 and 2009 combined with experts wine rankings as a measure of quality. The model predictions find strong support in the data and the results are robust to different measures of quality, samples, specifications, and to the potential endogeneity of quality.
Book Synopsis Constant Versus Variable Markups by : Hakan Yilmazkuday
Download or read book Constant Versus Variable Markups written by Hakan Yilmazkuday and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Markups, Quality and Transport Costs by : Julien Martin
Download or read book Markups, Quality and Transport Costs written by Julien Martin and published by . This book was released on 2010 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Prices, Markups and Trade Reform by :
Download or read book Prices, Markups and Trade Reform written by and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines how prices, markups and marginal costs respond to trade liberalization. We develop a framework to estimate markups from production data with multi-product firms. This approach does not require assumptions on the market structure or demand curves faced by firms, nor assumptions on how firms allocate their inputs across products. We exploit quantity and price information to disentangle markups from quantity-based productivity, and then compute marginal costs by dividing observed prices by the estimated markups. We use India's trade liberalization episode to examine how firms adjust these performance measures. Not surprisingly, we find that trade liberalization lowers factory-gate prices and that output tariff declines have the expected pro-competitive effects. However, the price declines are small relative to the declines in marginal costs, which fall predominantly because of the input tariff liberalization. The reason for this incomplete cost pass-through to prices is that firms offset their reductions in marginal costs by raising markups. Our results demonstrate substantial heterogeneity and variability in markups across firms and time and suggest that producers benefited relative to consumers, at least immediately after the reforms.
Book Synopsis Two Essays on Firm Entry and Pricing by : Xiaochen Xie
Download or read book Two Essays on Firm Entry and Pricing written by Xiaochen Xie and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Chapter 1: Re-exploring Markups and the Gains from International Trade This article investigates the welfare implication of trade liberalization, with variable markups, using evidence from the global smartphone industry. Higher trade exposure imposes forces on firms' markups from two directions: more competitive markets induce firms to lower their markups, while lower delivery costs motivate firms to lower their prices to an extent smaller than the decline in costs with the higher market demand and enhance their markups. To date, most structural work in international trade has ignored the potential welfare gains of trade liberalization through the markup channel by alleviating price distortions or has otherwise failed to track both of the directional forces that international trade imposes on markups. Accounting for the smartphone markets of 40 countries, I build a model of supply and demand in which both firms' product portfolio and pricing strategies are endogenous. I find that an increase in tariff rates would prompt mostly low-quality goods producers to exit the affected markets while increasing the price-to-cost margins of the remaining low-quality goods producers; meanwhile, the markups of the high-quality goods incumbents vary only little, or even reducing slightly to offset the market demand slump that the higher costs generate. My results suggest that if researchers only focus on the loss of variety when examining the impacts of higher trade barriers following traditional methods of measurement without paying attention to the markup channel, then the average consumer surplus loss could be underestimated by 7% to 10% through the price distortion. Chapter 2: Export Dynamics This paper studies firms' export dynamics using evidence from the global cellphone industry. Exporters tend to enter foreign markets that are geographically close or culturally similar to their previous export destinations. Most structural work of international trade has ignored firms' sequential export decisions across countries when estimating entry costs or has failed to build a framework in which firms' export-dynamic actions can be tractable or in which entry costs can be accurately estimated. I build a dynamic model in which firms first sequentially choose global regions for penetration and then spread out over the countries in the regions. I estimate firms' region- and country-level entry sunk costs for starting a business and the country-specific fixed costs for maintaining operation. I find that entering a new region with consumer characteristics similar to the previous export regions could reduce the entry costs as drastically as 81%. Relatedly, adding countries after penetrating a region would incur much lower entry costs than the costs associated with entering the first country in that region. Stricter trade regulation in large countries, such as the G7 group, would also reduce importers' entry margins and their trade value in the surrounding, smaller European countries. Moreover, conditional on the same productivity level, the geographical location of a firm's headquarters could determine as much as 70% of the variation in global expansion and sales. My model primitives predict a world with more advanced infrastructure, which can shorten the world's distance by half, could reduce delivery cost, and greatly enhance the consumer surplus in the mobile phone market by 1.3% to 3.87%. Compared to a static model, my dynamic model reports a gradual and less volatile increase in consumer surplus and market competition.
Book Synopsis Who's Getting Globalized? The Size and Implications of Intra-National Trade Costs by : David Atkin
Download or read book Who's Getting Globalized? The Size and Implications of Intra-National Trade Costs written by David Atkin and published by . This book was released on 2018 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: How large are the intra-national trade costs that separate consumers in remote locations of developing countries from global markets? What do those barriers imply for the intra-national incidence of the gains from falling international trade barriers? We develop a new methodology for answering these questions and apply it to newly collected CPI micro-data from Ethiopia and Nigeria (as well as to the US). In order to overcome three well-known challenges that arise when using price gaps to estimate trade costs, we: (i) work exclusively with a sample of goods that are identified at the barcode-level (to mitigate bias due to unobserved quality differences over space); (ii) collect novel data on the origin location of each product in our sample (to focus only on the pairs of locations that actually identify trade costs); and (iii) use estimates of cost pass-through to correct for mark-ups that potentially vary over space (to extract trade costs from price variation in an environment with potentially oligopolistic intermediaries). Without these corrections, we find that our estimates of the cost of distance would be biased downwards by a factor of approximately four. Our preferred estimates imply that the effect of log distance on trade costs within Ethiopia or Nigeria is four to five times larger than in the US. We also use our pass-through estimates to calculate the incidence of surplus increases due to falling world prices. We find that intermediaries capture the majority of the surplus, and that their share is even higher in distant locations, suggesting that remote consumers see only a small part of the gains from falling international trade barriers.
Book Synopsis Quality, Variable Markups, and Welfare : a Quantitative General Equilibrium Anakysis of Export Prices by :
Download or read book Quality, Variable Markups, and Welfare : a Quantitative General Equilibrium Anakysis of Export Prices written by and published by . This book was released on 2018 with total page 4 pages. Available in PDF, EPUB and Kindle. Book excerpt: Modern trade models attribute the dispersion of international prices to physical and man-made barriers to trade, to the pricing-to-market by heterogeneous producers and to differences in the quality of output offered by firms. This paper presents a general equilibrium model that incorporates all three of these mechanisms. Our model allows us to confront Chinese firm-level data on the prices charged and revenues earned across markets. We show that all three mechanisms are necessary to fit the distribution of prices and revenues across firms and markets. Accounting for endogenous quality heterogeneity across markets and firms is shown to be critical for the welfare implications of trade and for the response of prices to trade and tariff shocks.
Book Synopsis Who's Getting Globalized? by : David G. Atkin
Download or read book Who's Getting Globalized? written by David G. Atkin and published by . This book was released on 2015 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: How large are the intra-national trade costs that separate consumers in remote locations of developing countries from global markets? What do those barriers imply for the intra-national incidence of the gains from falling international trade barriers? We develop a new methodology for answering these questions and apply it to newly collected CPI micro-data from Ethiopia and Nigeria (as well as to the US). In order to overcome three well-known challenges that arise when using price gaps to estimate trade costs, we: (i) work exclusively with a sample of goods that are identified at the barcode-level (to mitigate bias due to unobserved quality differences over space); (ii) collect novel data on the origin location of each product in our sample (to focus only on the pairs of locations that actually identify trade costs); and (iii) use estimates of cost pass-through to correct for mark-ups that potentially vary over space (to extract trade costs from price variation in an environment with potentially oligopolistic intermediaries). Without these corrections, we find that our estimates of the cost of distance would be biased downwards by a factor of approximately four. Our preferred estimates imply that the effect of log distance on trade costs within Ethiopia or Nigeria is four to five times larger than in the US. We also use our pass-through estimates to calculate the incidence of surplus increases due to falling world prices. We find that intermediaries capture the majority of the surplus, and that their share is even higher in distant locations, suggesting that remote consumers see only a small part of the gains from falling international trade barriers.
Download or read book Markup & Profit written by Michael Stone and published by Craftsman Book Co. This book was released on 1999-01-01 with total page 316 pages. Available in PDF, EPUB and Kindle. Book excerpt: In order to succeed in a construction business you have to be able to mark up the price of your jobs to cover overhead expenses and make a decent profit. The problem is how much to mark it up. You don't want to lose jobs because you charge too much, and you don't want to work for free because you've charged too little. If you know how much to mark up you can apply it to your job costs and arrive at the right sales price for your work. This book gives you the background and the calculations necessary to easily figure the markup that is right for your business. Includes a CD-ROM with forms and checklists for your use.
Book Synopsis Whats is " Firm Heterogeneity " in Trade Models ?. by : Colin Hottman
Download or read book Whats is " Firm Heterogeneity " in Trade Models ?. written by Colin Hottman and published by . This book was released on 2014 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis What is Firm Heterogeneity in Trade Models? by : Colin Hottman
Download or read book What is Firm Heterogeneity in Trade Models? written by Colin Hottman and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We estimate a structural model of heterogeneous multiproduct firms to examine the sources of firm heterogeneity emphasized in the recent trade and macro literatures. Using Nielsen barcode data on prices and sales, we estimate elasticities of substitution within and between firms, and use the estimated model to recover unobserved qualities, marginal costs and markups. We find that variation in firm quality and product scope explains at least four fifths of the variation in firm sales. Most firms are well approximated by the monopolistic competition benchmark of constant markups, but the largest firms that account for most of aggregate sales depart substantially from this benchmark. Although the output of multiproduct firms is differentiated, cannibalization is quantitatively important for the largest firms. This imperfect substitutability of products within firms, and the fact that larger firms supply more products than smaller firms, implies that standard productivity measures are not independent of demand system assumptions and probably dramatically understate the relative productivity of the largest firms.
Book Synopsis Chinese Exports and U.S. Import Prices by : Benjamin R. Mandel
Download or read book Chinese Exports and U.S. Import Prices written by Benjamin R. Mandel and published by . This book was released on 2013 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a technique to decompose price distributions into contributions from markups and marginal cost. The estimators are then used as a laboratory to measure the relationship between increasing Chinese competition and the components of U.S. import prices. The estimates suggest that the intensification of Chinese exports in the 2000s corresponded to substantial changes in the distributions of both the markups and marginal cost of U.S. imports. The entry of a Chinese exporter in an industry corresponded to rest-of-world exporters shrinking their markup (lowering prices by up to 30 percent) and increasing their marginal cost (raising prices by up to 50 percent). The fact that marginal cost increased as competition stiffened strongly suggests that the composition of non-Chinese exports shifted toward higher-quality varieties. The estimates also imply a pattern in the acquisition of market share by Chinese exporters: They enter at relatively low cost/quality and then subsequently undertake quality improvements and markup reductions. These results provide some of the first measures of the dual nature of trade's procompetitive effects; exporters respond to tougher competition by simultaneously adjusting both markups and quality.
Book Synopsis Essays on Firms and International Trade by : Alvaro Felipe Garcia Marin
Download or read book Essays on Firms and International Trade written by Alvaro Felipe Garcia Marin and published by . This book was released on 2014 with total page 179 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation empirically examines three different questions related to the behavior and performance of firms participating of international trade. In the first essay, I ask whether exporting allows firms to charge higher markups. To study this question, I use a unique dataset of Chilean manufacturing firms that contains product-level data on the price and average cost for all goods produced and exported. This allows me to compute direct markup measures, and to identify whether markups variation is accounted by different pricing policies or changes in the production cost. Although within firms the export markup premium is moderate -about 2%-, the study of the trajectories of markups before and after export entry reveals the presence of ongoing gains after export entry. While at the moment of export entry the markup of exported products is not different than the markup of domestic products, three periods after export entry the markup wedge increases to about 7-9%. A decomposition of the markup premium reveals that, within firms, the higher markups on exported products is accounted by both higher prices and marginal cost. In contrast, after export entry, prices and average cost tend to decrease. In the second essay -based on joint work with Nico Voigtlaender-, we revisit the old question of whether firms become more productive after export entry. While there is strong evidence for productivity-driven selection into exporting, previous research has mostly failed to identify export-related efficiency gains within plants. This non-result is typically derived from revenue productivity, which reflects price variation. Using a census panel of Chilean manufacturing plants, we first confirm the non-result for revenue productivity. We then compute plant-product level marginal cost as an efficiency measure that is not affected by prices. We find within-plant efficiency gains of 15-25%, the same order of magnitude as selection effects across plants. Evidence suggests that technology upgrading in combination with export entry is an important driver behind these gains. The final essay studies firms' quality patterns across destinations, when they produce products in different quality segments. I develop a quality model with non-homothetic quality demand and heterogeneity in consumers' income. The model features quality sorting of consumers according to their income level. This implies that firm's quality allocation depends not only on the average income of the country, but on the entire income distribution of the country. The main prediction of the model is related to the role of income inequality on within-firm quality patters. I find that in countries with a smaller middle classes, firms' tend to skew their exports towards products of higher quality. This effect tends to be weaker in countries with higher income. To illustrate the main predictions of the model, I use a unique dataset from the Chilean wine industry. This dataset allows me to construct measures of product quality, that are not affected by aggregation or markup issues. In line with the model's predictions, I find that firms tend export proportionally more high quality products to more unequal countries. However, I find this effect to be quantitatively important only in low and middle-income countries.
