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Firm Heterogeneity and Export Pricing in India
Author(s) -
Anderson Michael A.,
Davies Martin H.,
Signoret José E.,
Smith Stephen L. S.
Publication year - 2019
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.1002/soej.12316
Subject(s) - productivity , china , scope (computer science) , product (mathematics) , quality (philosophy) , outcome (game theory) , economics , economies of scope , international trade , business , international economics , industrial organization , microeconomics , macroeconomics , philosophy , geometry , mathematics , epistemology , political science , computer science , economies of scale , law , programming language
We examine export pricing by Indian manufacturing firms in the early 2000s using a unique data set that matches firm characteristics with product and destination‐level trade data. We find that, in contrast to China and other countries, firm productivity is negatively associated with export prices, and export prices are negatively associated with distance while positively associated with remoteness. Our conjecture is that Indian innovation costs, which are higher than China's, drive down the scope for quality differentiation causing a negative association between productivity and prices. To the best of our knowledge, this is the first empirical evidence consistent with heterogenous goods and short quality ladders, a theoretical possibility noted in the study by Antoniades (2012), an outcome that arises here because of domestic Indian economic and regulatory features.