Inside the White Box: Unpacking the Determinants of Quality and Vertical Specialization

Esteban Jaimovich, Boryana Madzharova and Vincenzo Merella

No 8898, CESifo Working Paper Series from CESifo

Abstract: This paper explores patterns of quality differentiation and specialization relying on model-level panel data of retail sales and prices of refrigerators across 23 countries in the European Union. Unlike customs data aggregated at the product category, typically used in the literature, model-level data allow us to test for the presence of nonhomotheticities by comparing market shares of identical models across different markets. We measure quality at the model level, account for varying willingness-to-pay for quality at different levels of income, and link quality measures to objective model attributes. Using originally assembled data on the country of manufacture of each model, we study patterns of quality specialization by brands with plants in multiple countries. We find that firms locate the production of their higher-quality models in richer countries, and argue that such patterns of quality specialization are driven mainly by a home-market effect linked to nonhomothetic preferences.

Keywords: inferred quality; nonhomothetic CES; home-market effect; quality specialization (search for similar items in EconPapers)
JEL-codes: F10 F14 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-com
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp8898.pdf (application/pdf)

Related works:
Journal Article: Inside the white box: Unpacking the determinants of quality and vertical specialization (2023)
Working Paper: Inside the white box: Unpacking the determinants of quality and vertical specialization (2021)
Working Paper: Inside the White Box: Unpacking the Determinants of Quality and Vertical Specialization (2020)
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:ces:ceswps:_8898

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().