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Markups, Quality, and Trade Costs

Natalie Chen () and Luciana Juvenal ()

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: We investigate theoretically and empirically how exporters adjust their markups across destinations depending on bilateral distance, tariffs, and the quality of their exports. Under the assumption that trade costs are both ad valorem and per unit, our model predicts that markups rise with distance and fall with tariffs, but these effects are heterogeneous and are smaller in magnitude for higher quality exports. We find strong support for the predictions of the model using a unique data set of Argentinean firm-level wine exports combined with experts wine ratings as a measure of quality.

Keywords: Distance; export unit values; heterogeneity; markups; quality; tariffs; trade costs; wine JEL Classification: F12, F14, F31 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-int and nep-opm
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https://warwick.ac.uk/fac/soc/economics/research/c ... ns/446-2019_chen.pdf

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Working Paper: Markups, Quality, and Trade Costs (2019) Downloads
Working Paper: Markups, Quality, and Trade Costs (2019) Downloads
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