Quality and gravity in international trade

• 成果类型: Article
• 署名作者: Flach, Lisandra; Unger, Florian
• 署名单位: University of Munich; Leibniz Association; Ifo Institut; University of Gottingen
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2022.103578
• 发表日期: 2022
• 关键词: International trade; heterogeneous firms; gravity equation; product quality; Trade costs

摘要

This paper introduces endogenous quality innovations in a multi-country model with heterogeneous firms. We show that quality investments lead to an additional margin of adjustment in the gravity equation. In industries with a high scope for quality differentiation, the elasticity of bilateral exports with respect to fixed costs is lower due to adjustments at the extensive margin, whereas the elasticity with respect to variable costs remains unaffected. We find robust and consistent evidence for the effect of quality differentiation on the gravity equation, using aggregate trade data and Brazilian firm-level data. We apply our model and evaluate the impact of trade policies that reduce fixed export costs. Our results highlight that trade and welfare effects are substantially lower and become much more dispersed across industries than predicted by heterogeneous firm models without quality differentiation. (C) 2022 Elsevier B.V. All rights reserved.