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Prices and Market Shares in the International Machinery Trade

Irving B. Kravis, Robert Lipsey and Dennis M. Bushe

No 521, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We use new international price measures we have developed for machinery and transport equipment to explain changes in exports and export shares of the United States, Germany, and Japan. The effects of relative price changes on export shares are fairly large, producing relative quantity changes that are 50 to 100 per cent and as much as 200 per cent greater than the price changes. The effects of price changes seem to stretch out over 3 to 5 years and possibly longer. We also find that delays between order and delivery may affect measures of export quantity and of its response to price. Equations for individual countries suggest that exports by the United States are most responsive to relative price changes and those of Germany least responsive. The income elasticities are very sensitive to the inclusion or exclusion of a time variable to measure "unexplained" trends in exports. A system of supply and demand equations is developed in which the supply of exports depends on a country's export and domestic prices for the same goods, as well as on its real income. The supply elasticities range from about 2% for Germany to over 7 for the United States, implying that firms switch easily between domestic sales and exports.

Date: 1980-07
Note: ITI IFM
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Published as Kravis, Irving B. and Lipsey, Robert E. "Prices and Market Shares in the International Machinery Trade." The Review of Economics and Statistics, Vol. LXIV, No. 1, (February 1982), pp. 110-116. 6
Published as Bushe, Dennis, Irving B. Kravis and Robert E. Lipsey."Prices, Activity, and Machinery Exports: An Analysis Based on New Price Data" The Review of Economics and Statistics, Vol. LXVIII No. 2, pp. 248-55, May 1986.

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