Premium
Product quality and firm heterogeneity in international trade
Author(s) -
Gervais Antoine
Publication year - 2015
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/caje.12171
Subject(s) - quality (philosophy) , product (mathematics) , productivity , economics , selection (genetic algorithm) , wage , econometrics , product differentiation , variance (accounting) , unit (ring theory) , variation (astronomy) , industrial organization , microeconomics , labour economics , macroeconomics , philosophy , physics , geometry , mathematics , accounting , mathematics education , epistemology , artificial intelligence , cournot competition , computer science , astrophysics
This paper quantifies the separate contributions of product quality and technical efficiency in explaining variation in export outcomes across US manufacturing plants. Unlike previous studies that rely on unit values, I estimate idiosyncratic demand from price and quantity information. I find substantial across‐plant heterogeneity in demand, and consistent with the quality interpretation, demand is positively correlated with advertising expenditures, wage rates and material costs. I use this variation to explain across‐plant heterogeneity in export outcomes. The results show that, in addition to productivity, idiosyncratic demand is an important determinant of selection into exporting and the levels of foreign sales.