Crises and the Collapse of World Trade: the Shift to Lower Quality

Antoine Berthou and Charlotte Emlinger

Working Papers from CEPII research center

Abstract: One of the most striking features of the crisis that started during the fall of 2008 has been the sharp decrease in the world volume of trade in goods. The collapse of trade values has been even larger, leading to a decrease of import price indices. We argue that the decrease of import price indices can be explained by a decrease of the demand addressed to the most expansive varieties. Descriptive statistics for the EU15 confirm that the decrease in the import price index is mainly due to a loss in market shares by high price varieties. The estimation of import demand equations confirm that higher price varieties report a larger elasticity with respect to GDP variations, as compared to low price varieties. Countries specialized over high quality varieties are expected to lose more trade in periods of global turmoil, and experience a faster recovery.

Keywords: GLOBAL CRISIS; INCOME ELASTICITY; QUALITY LADDERS (search for similar items in EconPapers)
JEL-codes: E31 F14 F41 (search for similar items in EconPapers)
Date: 2010-03
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (21)

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