NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

International Prices and Endogenous Quality

Robert C. Feenstra, John Romalis

NBER Working Paper No. 18314
Issued in August 2012
NBER Program(s):   ITI

The unit values of internationally traded goods are heavily influenced by quality. We model this in an extended monopolistic competition framework where, in addition to choosing price, firms simultaneously choose quality. We allow countries to have non-homothetic demand for quality. The optimal choice of quality by firms reflects this non-homothetic demand as well as the costs of production, including specific transport costs, under the “Washington apples” effect. We estimate the implied gravity equation using detailed bilateral trade data for about 200 countries over 1984-2008. Our system identifies quality and quality-adjusted prices, from which we will construct price indexes for imports and exports for each country that will be incorporated into the next generation of the Penn World Table.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w18314

Users who downloaded this paper also downloaded these:
Feenstra, Hong, Ma, and Spencer w17728 Contractual Versus Non-Contractual Trade: The Role of Institutions in China
Manova and Zhang w18637 Multi-Product Firms and Product Quality
Feng, Li, and Swenson w18260 The Connection between Imported Intermediate Inputs and Exports: Evidence from Chinese Firms
Bernard, Jensen, Redding, and Schott w17627 The Empirics of Firm Heterogeneity and International Trade
Feenstra and Jensen w17916 Evaluating Estimates of Materials Offshoring from U.S. Manufacturing
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us