Quality, Variable Markups, and Welfare: A Quantitative General Equilibrium Analysis of Export Prices

Haichao Fan, Yao Li, Sichuang Xu and Stephen Yeaple

No 25611, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Modern trade models attribute the dispersion of international prices to physical and man-made barriers to trade, to the pricing-to-market by heterogeneous producers and to differences in the quality of output offered by firms. This paper presents a tractable general equilibrium model that incorporates all three of these mechanisms. Our model allows us to confront Chinese firm-level data on the prices charged and revenues earned within and across markets. We show that all three mechanisms are necessary to fit the distribution of prices and revenues across firms and markets. Accounting for endogenous quality heterogeneity across firms and markets is shown to be critical for the response of prices to trade and tariff shocks.

JEL-codes: F1 F10 F11 F12 F14 L11 L15 (search for similar items in EconPapers)
Date: 2019-02
New Economics Papers: this item is included in nep-bec and nep-int
Note: IO ITI
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Published as Haichao Fan & Amber Li & Sichuang Xu & Stephen R. Yeaple, 2020. "Quality, variable markups, and welfare: A quantitative general equilibrium analysis of export prices," Journal of International Economics, .

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Related works:
Journal Article: Quality, variable markups, and welfare: A quantitative general equilibrium analysis of export prices (2020)
Working Paper: Quality, Variable Markups, and Welfare: A Quantitative General Equilibrium Analysis of Export Prices (2018)
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