The global geography of income and export patterns

Dorothee Hillrichs

No 2023001, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: This paper studies heterogeneity in the income elasticity of exports across origin countries. Combining insights of the economic geography literature and the home market effect literature, I argue that foreign consumer preferences drive product specifications and thus export patterns. I capture foreign consumer preferences with a multilateral income term, “quality market potential”. Analysing product-level trade flows with a gravity framework, I show that countries with high quality market potential export more to high-income destinations. The effect outweighs the standard home market effect of domestic per capita income, is strongest for developing countries, and works chiefly through the quantity margin.

Keywords: Non-homothetic preferences; home-market effect; trade margins (search for similar items in EconPapers)
JEL-codes: F14 O19 R12 (search for similar items in EconPapers)
Date: 2023-01-11
New Economics Papers: this item is included in nep-geo, nep-int and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:2023001

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