FOREIGN ENTRY LIBERALIZATION AND EXPORT QUALITY: EVIDENCE FROM CHINA

This paper examines the impact of foreign entry deregulation in China on the export price and quality of manufacturing firms through input–output linkage. We create a unique dataset describing the extent of regulatory control over foreign entry across approximately 900 industries covering all primary, manufacturing and services sectors. Results suggest foreign entry deregulation encourages firms to improve product quality and increase export prices. Deregulation in the manufacturing sectors has more impact on downstream export price and quality, compared with services sectors. Moreover, firms having larger imported inputs benefit more from foreign entry deregulation. These effects are robust to alternative specifications. (JEL F1, D2, O2)     

Experimentation in Markets

We present a model of entry and exit with Bayesian learning and price competition. A new product of initially unknown quality is introduced in the market, and purchases of the product yield information on its true quality. We assume that the performance of the new product is publicly observable. As agents learn from the experiments of others, informational externalities arise.
We determine the Markov Perfect Equilibrium prices and allocations. In a single market, the combination of the informational externalities among the buyers and the strategic pricing by the sellers results in excessive experimentation. If the new product is launched in many distinct markets, the path of sales converges to the efficient path in the limit as the number of markets grows.     

GASOLINE PRICES,GOVERNMENT SUPPORT,AND THE DEMAND FOR HYBRID VEHICLES IN THE UNITED STATES*

We analyze the determinants of hybrid vehicle demand, focusing on gasoline prices and income tax incentives. We find that hybrid vehicle sales in 2006 would have been 37% lower had gasoline prices stayed at the 1999 levels, and the effect of the federal income tax credit program is estimated at 20% in 2006. Under the program, the cost of reducing gasoline consumption was $75 per barrel in government revenue and that of CO₂ emission reduction was $177 per ton. We show that the cost effectiveness of federal tax programs can be improved by a flat rebate scheme.     

Product quality and firm heterogeneity in international trade

This paper quantifies the separate contributions of product quality and technical efficiency in explaining variation in export outcomes across US manufacturing plants. Unlike previous studies that rely on unit values, I estimate idiosyncratic demand from price and quantity information. I find substantial across‐plant heterogeneity in demand, and consistent with the quality interpretation, demand is positively correlated with advertising expenditures, wage rates and material costs. I use this variation to explain across‐plant heterogeneity in export outcomes. The results show that, in addition to productivity, idiosyncratic demand is an important determinant of selection into exporting and the levels of foreign sales.     

Do standards improve the quality of traded products?

We examine whether standards raise the quality of traded products. Matching a panel of French firm–product–destination export data with a data set on sanitary and phytosanitary measures and technical barriers to trade, we find that such quality standards enforced on products by destination countries: (i) favour the export probability of high-quality firms provided that their productivity is high enough, (ii) raise the export sales of high-productivity, high-quality firms at the expense of low-productivity and low-quality firms and (iii) increase the quality supplied by firms if their productivity is high enough. We then develop a simple new trade model under uncertainty about product quality in which heterogeneous firms can strategically invest in quality signalling to rationalize these empirical results on quality and selection effects.     

China’s competition and the export price strategies of developed countries

This paper analyzes the impact of Chinese competition on developed countries’ export prices. The empirical application is on Italy, one of the main European manufacturing exporters with exports at high risk of competition from China. Our results show that, following China’s entry into the WTO, the price strategies of Italian firms has been affected. While in general the increasing Chinese export competition resulted in an upgrading of products exported, the impact has been different according to the sector and technological level. The incentives to upgrade have been stronger for low technology sectors, where competition is tougher and varieties of products sold lower. To highlight quality differentials, and isolate the effects on the different segments of the distribution of Italy’s export prices, we run quantile regressions. We find that are mainly those products sold at low prices to face a strong pressure to upgrade.     

Innovation,trade and multi‐product firms

This paper contributes to the literature on the relationship between innovation and exports by developing a model that emphasizes the role of product innovation in explaining heterogeneity in export behaviour both across and within firms. The dynamic model assumes that firms invest to maintain and increase the portfolio of products they sell: innovation is a stochastic process whereby the probability to capture new business opportunities is a function of the number of goods already sold. Crucially, the model assumes two independent mechanisms to drive the extensive and the intensive margins of a firm's export. The resulting lack of (built‐in) correlation between the two margins is well reflected in the data and represents the main contribution of our theoretical framework. The model is consistent with several other empirical regularities that characterize multi‐product firms, such as the heavy tail in the distribution of the number of products exported by each firm, the strict hierarchy in the sales of products across markets, the substantial degree of product churning and the highly skewed distributions of export sales.     

HOUSE PRICES,SALES, AND TIME ON THE MARKET: A SEARCH‐THEORETIC FRAMEWORK

We assess the ability of a standard search and matching framework to account for the cyclical properties of key macroeconomic time series of the housing market. We calibrate a model with aggregate demand and supply shocks to match selected business cycle properties of vacancies and sales in the United States. Our model reproduces the cyclical time series properties of house prices and the positive and negative comovement of prices with sales and time on the market, respectively. Search and matching frictions produce trading delays that augment the volatility of prices and propagate the effect of aggregate shocks to future periods.     

Income inequality and export prices across countries

This paper provides theory and evidence on the links between income inequality within a destination country and the patterns of trade and export prices. The theoretical framework relates income inequality to product quality and prices using a simple demand composition effect. The model predicts that a more unequal income distribution in a destination country leads to higher average prices, though the effect is nonlinear and disappears for rich enough countries. The predictions are tested using detailed firm‐level data. Controlling for income per capita, prices are systematically higher in more unequal destinations, and the strength of this effect depends on income per capita. Results are particularly important for middle‐income countries and hold only for differentiated goods, and in particular for products with a high degree of vertical differentiation.     

Micro-responses to shocks: pricing,promotion, and entry*

We study the market response to firm-specific demand shocks in a natural experiment setting. In 2006, a boycott of Danish products in several Arab countries was devastating for Danish cheese products firms. In Saudi Arabia, their market share collapsed from 16.5 percent in January to below 1 percent in March, and never fully recovered; by 2009, it was 6.3 percent. By analyzing micro-level (scanner) price and sales data, we find the following. (i) Danish firms lowered prices but kept the product mix the same. (ii) Non-Danish firms kept prices constant but changed their product mix by introducing new products and new product bundles. (iii) Non-Danish firms chose to introduce products that were similar to the Danish products in characteristic space in order to compete head-to-head. We complement the analysis with a theoretical framework that helps to account for our main findings.     

A 'pricing-to-market' model with unobserved variables: explaining New Zealand's import prices

A model of ‘pricing-to-market’ (PTM) behaviour in import prices is developed for a small open economy to allow for two measurement problems: (i) that neither the marginal production cost of imported goods nor their corresponding (foreign-currency) export price are observable by the econometrician; (ii) that PTM behaviour, if it exists, alters the relationship between foreign countries' export price indices for total exports and the true, unobservable price index. The analysis shows that variations in the measured markup on import prices depends on the degree to which domestic demand is synchronized with world demand, whether bilateral exchange rate movements are due to domestic or foreign factors, and on the degree to which PTM behaviour differs from such behaviour in other countries. Equations estimated for the price of New Zealand (NZ) imports from the US strongly supports the model, and finds that the degree of PTM by US exporters in response to price and exchange rate movements is substantially greater in NZ than the average for other countries. However, the degree of PTM in NZ in response to excess demand is similar to that of other countries.     

The impact of restructuring and deregulation on gas rates

This article evaluates the impact of consumer choice programs, price caps, and sliding scale plans on consumer prices of gas using a custom survey of public service commissions and data from the Department of Energy. A seemingly unrelated regressions model estimates residential, commercial and industrial prices jointly, controlling for potentially endogenous demand. Consumer choice programs are estimated to lower residential and commercial prices significantly, by bringing competition to markets with smaller consumers. Prices fall even before deregulation as utilities build consumer loyalty and fight competition. Sliding scale plans are estimated to lower prices of small consumers while raising industrial prices. Price caps lead to overall higher prices, with unclear ranking across consumer classes.      

The Dynamics of Markups and Inventories in Retailing Firms

This paper is concerned with the interaction between price and inventory decisions in retailing firms and its implications for the dynamics of markups and the existence of sales promotions. We consider a model where a monopolistically competitive retailer decides price and inventories, and assumes lump-sum costs when placing orders or changing nominal prices. In this model, the existence of stockout probabilities and fixed ordering costs generate a cyclical price behaviour characterized by long periods without nominal price changes and short periods with very low prices ( i.e. sales promotions). We estimate this model using a unique longitudinal dataset with information about retail and wholesale prices, inventories, orders, and sales for several brands in a supermarket chain. Based on the estimated model we perform several counterfactual experiments that show the important role that inventories and fixed ordering costs play in the dynamics of retail prices and the frequency of sales promotions in this dataset.     

PRODUCT FUNCTIONALITY,COMPETITION, AND MULTIPURCHASING

The more functionalities a good offers, the greater is its perceived quality. Equilibrium prices in standard spatial competition models depend solely on quality differences. We assume that new functionalities are more appreciated the closer a product is to a consumer's ideal variety. Prices are then increasing in functionality levels. Furthermore, we endogenize whether consumers buy only one of two varieties (single‐purchase) or both (multipurchase). Under multipurchase, there might be a hump‐shaped relationship between equilibrium prices and functionality levels. Therefore, it could be optimal for each supplier to sacrifice sales and set prices so high that multipurchase is eliminated.     

Strategic delegation under quality competition

This paper examines strategic manipulations of incentive contracts in a model where firms compete in quality as well as in price. Compensation schemes for managers are based on a linear combination of profits and sales. For a given level of quality, a firm desires to reduce the manager's compensation when product sales increase; this serves as the firm's commitment to raise prices. Nevertheless, in general, a manager has a stronger incentive to produce goods of higher quality if he is compensated according to sales. Therefore, a compensation scheme that penalizes a manager when sales increase may result in products that are inferior to those of its rival. We show that, depending on the nature of quality, a positive weight on sales may be desirable when firms compete in quality and price. Welfare implications are also explored.     

Trade prices and supply in the UK economy

Current account imbalances are a major source of instability in the world monetary and trading system. Measures to correct these imbalances have largely involved adjustments to exchange rates. In the international trade literature, when the current account is in deficit, the Marshall-Lerner condition is sufficient for a successful devaluation. However, this partial equilibrium condition — apart from being based on the assumption that supply elasticities are infinite — abstracts from how the domestic economy responds to the change in relative prices. In this paper we develop a model of price and output determination in an open economy with imperpectly competitive markets, and draw a distinction between goods which are exported and those which are supplied to the domestic market. This means that we have to determine jointly both export prices and the domestic price of house sales. We show that as long as there is no money illusion in the labour market a fall in the nominal exchange rate raises domestic and export prices proportionally and leaves trade volumes unaffected. However, shifts in domestic absorption relative to overseas demand — by changing relative prices — cause shifts in the relative supply of exports and domestically sold goods and affect the trade balance. Thus fiscal and monetary measures directed towards reducing domestic absorption are more likely to be successful in correcting current account imbalances than exchange rate depreciation.     

技术性贸易壁垒的Bertrand博弈分析

不同于现有研究采用最小质量标准作为技术性贸易壁垒,本文通过限定消费者对进口产品质量偏好的最低下限作为技术性贸易壁垒,并采用Boom的效用函数定义,建立了我国出口企业和发达国家企业在发达国家产品市场上进行两阶段Bertrand价格竞争的动态博弈模型,分析了发达国家设置技术性贸易壁垒的影响.结果表明,发达国家设置技术性贸易壁垒,降低了进口产品的需求,导致市场均衡价格和均衡利润的下降,但是我国出口企业的下降幅度更大.我国出口企业通过提高产品质量积极应对后,我国产品的市场需求和企业利润上升;而发达国家本国生产的产品需求和企业利润下降,但是发达国家消费者的福利却得到提高.     

Exporting to bypass weak institutions

Institutions have been shown to be important for trade and growth. In particular, weak institutions may reduce the returns to product quality, harming domestic welfare and making it attractive to export to countries with strong institutions where quality is better rewarded. We model this alternative story as to why the “good apples are shipped out” and explore whether exporting ameliorates the problems created by weak institutions. We find that, instead, because home prices do not reflect the marginal value of quality, access to developed markets can be welfare reducing. Specifically, there are always export prices such that total welfare (and not just consumer welfare) is harmed by exporting. Furthermore, if the domestic price equilibrates to the export price, then the marginal unit exported reduces total welfare. Exporting can even reduce producer surplus, leading to a contraction of the export industry; although, welfare can decrease even if production of the exported good increases. Thus, our results reinforce the importance of strengthening institutions to help the development of economies.     

Regional effects of export tax rebate on exporting firms: Evidence from China

This paper extends a model from 2003 to separate the direct and indirect impact of an export tax rebate on the intensive margin of firm‐level export sales at the subnational level. The direct impact of the rebate is associated with a reduction of an exporting firm's variable costs, while the indirect impact manifests itself through higher regional wages as a result of increased demand for local labor. First, the empirical results imply that a 1 percent rise in the export tax rebate rate increases the export sales among continuing exporters by 0.2 percent through the direct channel. Second, through the indirect channel, a 1 percent difference in the regional rebate causes a 0.02 percent difference in exporters' sales growth. Both effects are statistically significant, and are consistent with the model's predictions.     

我国水产品出口贸易的CMS分析

采用UNCOMTRADE有关数据,基于＂恒定市场份额模型（CMS模型）＂,从需求、产品结构、出口竞争力三个方面对1993～2006年我国水产品出口增长成因分三阶段进行实证分析。结果显示,我国水产品出口增长主要依赖于世界水产品市场的需求的增长,这是导致我国水产品出口贸易波动的主要因素,而产品的结构和竞争力对出口贸易的贡献相对较小。文章提出应通过调整水产品出口结构、实行水产品多元化的国际市场营销战略、扩大水产品深加工等措施提升国际竞争力,以促进我国水产品出口增长。