Multi-product exporters: Costs, prices and markups on foreign vs domestic markets

Catherine Fuss

No 383, Working Paper Research from National Bank of Belgium

Abstract: After establishing that exporters obtain higher margins than non-exporters, the paper takes a new look at export premia by comparing multi-product exporters’ costs, prices and markups on the domestic and foreign markets. This firm-product-market analysis is made possible thanks to a unique dataset for Belgian manufacturing firms over 1996-2016. Firm-product estimates of marginal costs are obtained following De Loecker et al. (2016) methodology, based on firm-product production data. Combined with firm-product international transaction data, firm-product unit values can be computed separately for the domestic market and foreign markets. Markups can then be recovered at the firm- product-market level from observed unit values and estimated marginal costs. The empirical results suggest that firms select their best products, the ones with lower marginal cost, for foreign markets. They partly translate this cost advantage into lower prices, but essentially extract higher margins from these.

Keywords: markups; multi-product firms; pricing decisions; international trade (search for similar items in EconPapers)
JEL-codes: D22 D24 F14 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2020-06
New Economics Papers: this item is included in nep-ind and nep-int
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:nbb:reswpp:202006-383

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