The Desire for (Danish) Quality in High and Low Income Countries

Daniel Nguyen

No 11-06, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: We estimate the correlation between firm prices and sales within a CN8 product-country-year market. We do this for every market to which at least 16 different Danish firms exported between 1999 and 2006. Approximately 60% of Danish exports are to markets in which the price is negatively correlated with sales. These correlations are significantly different across destination countries within product categories, but across years for a given product-destination pair. While some existing theories perform better than others at predicting these patterns, none can reconcile the variation across countries. To fully explain the patterns, We introduce a model in which the price-sales correlation can be interpreted as the market's desire for high quality goods over low cost substitutes. We discover an inverted U shaped relation between a country's desire for quality and its per capita GDP, which we term a Quality Kuznets Curve. This curve has a turning point around 10 000 Euros for Danish exports. The Quality Kuznets Curve appears both when looking across products and within products.

Keywords: exports; firm heterogeneity; quality; productivity; Kuznets (search for similar items in EconPapers)
JEL-codes: F12 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2011-02
New Economics Papers: this item is included in nep-cis, nep-int and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:1106

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