Economics at your fingertips  

Sector and Importer Determinants of Prices for Traded Intermediates

Eddy Bekkers, Joseph Francois and Miriam Manchin ()

No 14080, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: While the literature on traded goods prices emphasizes final goods prices and related consumer theory to explain variation in goods prices with importer characteristics, trade in intermediates actually constitutes about two-thirds of total trade. We propose a mechanism for explaining variations in the prices of intermediates as a function of importer characteristics, wherein production is vulnerable to failure and the probability of failure declines in the quality of intermediates. Higher wages mean a greater opportunity cost of failure, leading to a stronger demand for high-quality intermediates where firms face higher wages. We find empirical support for this mechanism in the case of intermediate goods using IV regressions. In addition, our findings indicate that while the cost of labor explains about one-fifth of variation in imported intermediate prices, it is a non-significant determinant of imported final good prices.

Keywords: Intermediates Trade; Traded Goods Prices (search for similar items in EconPapers)
JEL-codes: F12 F14 (search for similar items in EconPapers)
Date: 2019-10
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at

Related works:
Journal Article: Sector and importer determinants of prices for traded intermediates (2020) Downloads
Working Paper: Sector and Importer Determinants of Prices for Traded Intermediates (2019) Downloads
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:

Ordering information: This working paper can be ordered from ... rs/dp.php?dpno=14080

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

Page updated 2021-02-03
Handle: RePEc:cpr:ceprdp:14080