Positive and negative effects of distance on export prices

Volodymyr Lugovskyy and Alexandre Skiba

Journal of Economic Behavior & Organization, 2016, vol. 127, issue C, 155-181

Abstract: In a model of international trade with non-homothetic preferences and endogenous product quality where some firms choose common quality for all destinations, we find a novel effect of distance on quality and export prices. This effect is either positive or negative depending on whether the importer is, respectively, poor or rich relative to the other export destinations. Interestingly, the effect goes against the well-documented Alchian–Allen effect if the importer is relatively rich. This is because greater distance to relatively rich countries decreases the demand for quality. The estimated effects of distance in a sample of product-level imports to nine Latin American countries and the United States support our theory.

Keywords: Quality; Relative income; Economic geography; Alchian–Allen effect; Linder; Distance (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167268116300750
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:127:y:2016:i:c:p:155-181

DOI: 10.1016/j.jebo.2016.04.018

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().