TY  - JOUR
AU  - Blonigen,Bruce A.
AU  - Soderbery,Anson
TI  - Measuring the Benefits of Product Variety with an Accurate Variety Set
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14956
PY  - 2009
Y2  - May 2009
UR  - http://www.nber.org/papers/w14956
L1  - http://www.nber.org/papers/w14956.pdf
N1  - Author contact info:
Bruce Blonigen
Department of Economics
1285 University of Oregon
Eugene, OR 97403-1285
Tel: 541/346-4680
Fax: 541/346-1243
E-Mail: bruceb@uoregon.edu

Anson Soderbery
Department of Economics
Purdue University
Krannert Building
403 W. State St,
West Lafayette, Indiana 47907-2056
E-Mail: asoderbe@gmail.com
AB  - Recent studies have used import data to assess the impact of foreign varieties on prices and welfare for a home country. The reliance on import data has a number of limitations. First, these papers rely on goods categories defined by the Harmonized System. Second, they define varieties using the Armington assumption that all imports coming from a particular country are one unique variety. Third, they ignore variety changes that may occur through foreign affiliate activity. In this paper, we revisit this literature by employing a detailed market-based data set on the U.S. automobile market that allows us to define goods varieties at a more precise level, as well as discern location of production and ownership of varieties. We show that estimated variety changes and their impacts on U.S. prices and welfare differ markedly for automobiles depending on whether one uses the standard import data or our more detailed market-based data. The import data and Armington assumption hide significant net variety change leading to a downward bias in the effects of net variety change, with implied welfare benefits only half what we find with our market-based data. We also show that the welfare gains from all foreign-owned varieties (both imported and from foreign affiliates) are well over 50% larger than that stemming from imported varieties alone.
ER  -