Export Unit Values Research Articles

Income inequality and the quality of imports

This paper studies the role of income inequality in the importing country as a determinant of export unit value and product quality estimated employing information on market shares and prices. Using detailed firm-level data, we find that higher inequality in the destination market is associated with lower unit value and product quality. Noticeably, the negative effect of inequality is stronger in richer destinations. Firm-level heterogeneous responses to market conditions explain changes in unit value and quality. Incumbent exporting firms report lower unit value when income inequality increases, while entrants supply products of lower quality. All in all, our findings show that income inequality is a determinant of import demand which ultimately induces quality and unit value differentials across markets.

Shipping the good agricultural products out: the differentiated impact of per-unit duties on developing countries

Abstract We investigate the impact of per-unit duties (i.e. tariffs expressed in US dollars per unit of imported product) on world agricultural trade patterns. Using detailed data on trade and tariffs, we show first that they induce higher export unit values, confirming that the Alchian–Allen conjecture can be extended to per-unit duties. Second, we show that this effect is higher for developed countries, which can be explained by their specialization on high-priced products. Third, we find that the restrictive effect of per-unit duties on trade is higher for developing countries.

Trade effects of geographical indication policy: The EU case

AbstractUsing a new detailed dataset on country‐product information on European Union (EU) Geographical Indications (GIs), we study the impact of this food quality policy on trade margins over the 1996–2014 period. We consider the effect of GIs on both intra‐ and extra‐EU trade margins (extensive and intensive), as well as on export (and import) unit values. Our main results show that GIs affect trade flows differently depending on whether GIs are produced by the exporter or importer country. The presence of GIs in the exporter country systematically exerts a positive trade effect on both the extensive and intensive trade margin. When registered only in the importer country, GIs seem to act weakly as a trade‐reducing measure, at least at the intensive trade margin. In addition, GIs positively affect export prices, consistent with the idea that GI products are perceived by consumers as higher quality goods. Importantly, extra‐EU trade margins react similarly to those on intra‐EU trade. These results have clear and interesting implications concerning the EU strategy of promoting the protection of GIs worldwide.

Factors influencing international beer trade

Beer has been presenting in human life for a long time. The oldest written proof of beer production, the “Monument Bleu”, comes from Mesopotamia, the 3rd millennium BC and by this time brewing was regulated by law (Ulischberger, 1982). Nowadays, globalization liberates the markets and large brewing companies achieve tremendous growth. In 2016, trade value of beer made from malt was 13,8 billion USD, according to the UNComtrade (2019) data. The main exporter was Mexico with 27% share in total beer export, followed by three EU beer producers: Netherlands, Belgium and Germany with shares of 14%, 11% and 9%, respectively. On the other side, beer import was even more concentrated: the USA represented 35% of global beer import, followed by France and the United Kingdom (5-5%), China (4.5%) and Italy (4.3%). In case of beer, domestic consumption largely determines the industry, because the largest producers are not the top exporters. Based on FAO (2019) data, in 2014, 28% of global beer production was brewed in China, followed by the USA (the biggest importer - 13%), and 8% was produced in Brazil. Germany and Mexico, the two main exporters, only had 5-5% of market shares in terms of global beer production.
 In our study we measured competitiveness using the index of Symmetric Revealed Comparative Advantage (SRCA), calculated for all countries exporting beer in the period of 1988-2017. In order to identify factors influencing SRCA, we applied panel-data linear models by using feasible generalized least squares (FGLS). We used the following independent variables for the model: barley production, FDI (foreign direct investment) levels, population, per capita GDP, per capita beer consumption, beer export unit value, number of beers with geographical indications, EU membership (as a dummy variable) and beer production.

Foreign competition and quality sorting: Overlaps in US and Chinese exports

AbstractThe paper studies the performance of US exports conditional on presence and magnitude of Chinese exports in the same foreign markets. Outcomes within product—destination markets are analysed in a panel covering 4,219 products, 67 destinations and 11 years (1996–2006). Generally, an increasing exposure to Chinese export competition is related with lower US export revenues, quantity and market shares. Robustness checks support existence and direction of a causal relationship. Other outcomes, such as product switching, market exit and export unit value adjustments are less clear‐cut. Detailed analyses of responses in individual destinations and product categories suggest that this is, partly, because Chinese and US exports compete only in some markets. In product markets where lower US export quantity coincides with adjustments of export unit value, quality sorting appears to be prevalent. In some cases, however, lower export unit values appear to help export quantities remain unchanged. Overall, the average estimated displacement effects obtained from a pooled sample mask substantial panel‐unit heterogeneity.

Analysis of the Main Aspects Regarding the Price Indices Applied in the Determination of Inflation

Inflation is the abridged or statistically synthesized form of price rises. Inflation can be expressed in the terms we commonly encounter in analyzes and daily studies as the consumer price index, which is nothing more than the evolution of the prices of the goods bought and of the tariffs and services used. It is, to put it this way, the main index or instrument for assessing inflation. However, a number of other indicators that are specific to the economic activity domains are used in the calculation of the consumer price index. Thus, we find the index of industrial production prices, the unit value of exports and imports, the cost of living index, the retail price index, the construction cost index, the agrifood product price index, or the average exchange rate index. All of these indicators that we have mentioned are used in inflation calculations in the sense that they are being discussed when it comes to determining how inflation is evolving. Inflation is an indicator that has negative effects on the real outcomes of economic activity and negatively influences the real value of the incomes of the population at one time. In calculating inflation, a number of issues have to be resolved, such as the definition of the calculated indicators, the advantages and disadvantages of the harmonization of the indicators mentioned the scope of each of them, the data sources and especially the most commonly encountered problem, the weighting system which we use. We know that there is an integrated household survey, family budget surveys, so that the data obtained can be processed so that they can present in a realistic way the evolution of prices within the national economy. Inflation is also important because once we know the concrete results; we can bring macroeconomic performance indicators as well as other sizes at a real comparability level. It is known that in the evolution of each period of time the macroeconomic indicators are calculated in the prices of the respective period, and then by deflation we manage to bring the indicators to a level of comparability. In the study, the emphasis is on solving these issues, so that specific inflation indices, such as the monthly inflation rate, the monthly average inflation rate, the inflation rate at the end of the period or year or the annual inflation rate, will be harmonize, correlate and put in place the possibility of making a realistic inflation calculation in the national economy. The Laspeyres or Paasche type weighting issue involves two issues that need to be considered when we build indicators that measure inflation.

Foreign direct investment and export quality upgrading in China's manufacturing sector

Using a Melitz-type theoretical model of firm heterogeneity, we show that (i) the presence of foreign firms within an industry affects the industry export quality and (ii) the industry export quality is directly related to the industry export price. As the industry export price can be approximated by the industry export unit value, our work provides a rigorous theoretical justification for several empirical studies that use export unit value as a proxy for export quality. We then convert our theoretical model-based structural relationships into a system of equations. Using industry level panel data from China's manufacturing sector, and measuring the industry export quality by the industry export unit value, we find that an increase in foreign presence in China's manufacturing sector contributes to a significant increase in China's export quality. We also distinguish between foreign presence in China originating from the Hong Kong, Macao and Taiwan (HMT) and non-HMT regions. We find that foreign presence in China's manufacturing sector that originates from the HMT region leads to a much larger increase in China's export quality. The main empirical result is found to be robust with respect to alternative measures of foreign presence and aggregate demand.

Comparative advantage, product quality, and the competitiveness of firms

PurposeThe purpose of this paper is to emphasize the importance of product quality in differentiated-products markets in determining the structure of competition among firms.Design/methodology/approachFirst, two distinct models of firm heterogeneity are considered as two possible structures for firms’ competition: “price competition” and “quality competition.” Then, the author exploits the bilateral trade data of the world’s 83 largest countries in order to examine a link between the empirical findings and the theoretical models.FindingsThe empirical findings support a model of “quality competition” rather than “price competition,” in which firms in a country with a comparative advantage in a given product tend to improve their product quality as opposed to lowering production costs, so they compete on the quality-adjusted price.Research limitations/implicationsThis paper used product-level data to examine the spatial pattern of the average export unit value of a product, which is able to answer the question of whether an industry is involved with quality competition. The product-level data used in this study, however, are not ideally suitable for exploring the predictions of a heterogeneous firms’ trade model.Originality/valueTo the best of the author’s knowledge, this is the first paper that investigates a relationship between the country-product pair of comparative advantages and firms’ self-selection behavior in the product-level data to shed light on the role of product quality in determining the structure of firms’ competition.

Quality Upgrades of EU Agri‐Food Exports

AbstractWe investigate determinants of quality upgrades in EU agri‐food exports using panel data models for the period 2000–2011. By employing highly disaggregated data we show that the unit value of exports is positively correlated to level of economic development and size of population. Our results highlight the negative impacts of comparative advantage and trade costs on upgrades in export quality. Our analysis partly confirms the role of income distribution in quality specialisation, that greater income inequality increases specialisation in quality upgrades. Findings are robust when applied to alternative subsamples, including vertically specialised and final agri‐food products.

Pricing-To-Market Analysis: The Case of EU Wheat Exports

The EU is a major player in the global wheat market. This paper examines the pricing behaviour of EU wheat exporters using a pricing-to-market (PTM) analysis. Wheat is an exemplary product for testing PTM theories as it is widely and frequently traded, and largely unbranded. We estimate the relationship between export unit values and exchange rates using quarterly panel data for 11 EU export destinations for 2000–2013. Results show that there is a meaningful long-run relationship between export unit values and exchange rates, but there is little evidence of differential mark-ups between EU export markets. Belarus and Iceland are exceptions where exporters from the EU appear to exercise local currency price stabilisation.

Why do within‐firm–product export prices differ across markets? Evidence from Hungary

AbstractIn this study, we analyse the relationship between distance and f.o.b. export unit values using firm–product–destination data from Hungarian manufacturing. Using 10‐digit Harmonized System data, we show that a doubling of distance is associated with about 7.5 per cent increase in the average product‐level price, from which five percentage points can be attributed to within‐firm–product variation. We run a number of tests to look for heterogeneity in this pattern. Interestingly, the measured effect is very similar for domestic and foreign firms but distance seems to matter somewhat more for EU countries than outside the EU. We do not find much evidence for heterogeneity across product categories based on measures of vertical differentiation. The level of product aggregation matters; the distance coefficient is larger when products are aggregate to the eight or six‐digit level.

Transfer Pricing by Multinational Firms: New Evidence from Foreign Firm Ownerships

Using a firm-level dataset of Danish exports between 1999–2006, we find robust evidence for profit shifting by multinational corporations. Our triple difference estimations exploit the response of export unit values to acquisitions of foreign affiliates and to changes in statutory corporate tax rates. This identification strategy corrects for a downward bias resulting from firms adjusting arm's length prices to obscure transfer price manipulations. We find that Danish multinationals reduce the unit values of their exports to low tax countries between 5.7 to 9.1 percent. This difference corresponds to a tax revenue loss of 3.24 percent of Danish multinationals' tax returns. (JEL D21, D22, F14, F23, H25, H32)

Quality of Firms’ Exports and Distance to Destination Countries: First Evidence from Germany

This paper uses a tailor-made new data set of 7,112,614 observations for export quality (measured by the unit value of exports) at the firm-product-destination level for German and the reporting year 2011. Data are from 119,280 firms that exported 4986 products (recorded at the HS6-level) in 1,632,731 firm-product combinations to 174 countries. The paper investigates for the first time the link between the quality of firms’ exports and the distance to destination countries for Germany. It is shown that, in line with theory, the quality of exported goods and distance to destination countries are statistically positively correlated.

A Study on the Modal Choice Pattern based on the Unit Weight Value of Export Freights

우리나라는 국토 여건상 대부분의 수출이 항만과 공항을 통해 이루어지며, 따라서 국제화물 운송수단 선택도 선박과 항공기 간의 경쟁으로 결정된다. 시기별 수단 간 경쟁의 결과는 해당 시기의 운송 수단별 분담률로 귀결되는데, 여기에 가장 큰 영향을 미치는 요인은 화물의 중량 대비 가치(단위가치)이다. 본 연구의 목적은 1990년대 이후 지금까지 국내 주요 수출품의 단위가치 변화에 따라 해당 화물의 국제 운송수단 분담률이 어떤 패턴으로 변화하였는가를 분석하고 이의 시사점을 밝히는 것이다. 이를 위해 연도별 주요 수출품목의 단위가치와 항만-공항 수출 비중을 산출하고, 의미있는 분석대상 선정을 위해 총 1,198개 수출품목(HS code 4단위 기준) 중 334개 품목을 대상으로 상관관계 분석을 하였다. 이런 과정으로 최종 선정된 57개 품목을 대상으로 시계열 회귀분석을 실시하여 화물 단위가치에 따른 운송수단 분담률 변화 모형을 구축하고, 이 중 정합성을 확보한 27개 모형 함수의 변화 탄력성을 계산하였다. 분석결과, 국내 수출화물의 운송수단 선택 패턴 및 변화 양상을 이해하고 관련 물류산업에서 참고할 수 있는 7가지 결론과 향후 연구 과제를 도출하였다. 1990년대 이후 실제 수출 자료를 기반으로 품목별 운송수단 선택 패턴을 분석한 금번 연구는 향후 FTA 무역 환경 하에서 더욱 복잡해질 것으로 예상되는 화물 운송수단의 선택 의사결정에 유의미한 시사점을 제시해 줄 것으로 기대된다.Korea has made almost all exports through ports and airports, and therefore the international freight modal choice is determined by competition between ships and aircraft. The result of modal competition between sea and air is represented by the modal share. A major contributor to this is the weight unit value of cargo. The purpose of this study is to analyze the share of international freight transport modal choice depending on changes in the weight unit value of exports freight since 1990’s, and to clarify which characteristics are immanent in it. For this, this study calculates the weight unit price of export freights and the modal share between port and airport. And then, for a meaningful target selection, correlation analysis was performed to 334 items extracting from 1,198 total items(HS code 4 unit basis). Using the final selected 57 items, Time-series regression analysis were performed to establish the modal choice models based on the changes in unit value. Finally, the elasticity changes in the 27 regression function were calculated. This study presents seven findings that can be consulted at the analysis and logistics industry to understand the changing patterns of export cargo modal choices. Also, these conclusions based on analysis of the actual export data will give meaningful implication on the decision of modal choice under FTA trade environment.

Impending Strategic Business Alliance of ASEAN–India: An Experiential Conjecture

A dynamic export demand model of India–Association of Southeast Asian Nations (ASEAN) competitiveness is estimated that explicates India’s strategic export behaviour to the nth country in ASEAN in relation to the import function and the unit value of exports of India implicit to the local price level of the consumer country. The research article identifies the structure within which improvement of connectivity of India’s technical expertise could be extended to ASEAN for comprehensive and wide-ranging economic cooperation. The study’s inferences contribute in entailing how the ASEAN community recognises the need to provide necessary capacity building and to initiate reforms for enhancing their business competitiveness and to upgrade their national enterprises at a more sophisticated level determining their future competitiveness. While, on one hand, it seems that economic integration will remain the key to ASEAN competitiveness in the countenance of vicious competition in the global marketplace, on the other hand, the trade and investment relations of the ASEAN with other countries, particularly with developed economies, will also foster their investment development path and prosperity. In addition to the possibilities of India–ASEAN integration, other challenging efforts for governance would narrow the development gaps among ASEAN economies. This corroborates prospects for India in a constructive manner yielding association within the ASEAN economic framework that will eventually congregate with the affiliation. The findings entail that economists pay much more attention in identifying other sources of permanent and Asian country-specific real changes to explain economic fluctuations in ASEAN economies.

High-income export destinations, quality and wages

This paper establishes a link between the income level of the destination countries and the level of average wages in the exporting country across the world economy. We use cross-country panel data to set up an instrumental variable model of high-income export destinations and wages. We find robust evidence that, worldwide, industries that ship products to high-income destinations do pay higher average wages. Our IV results indicate this is a causal relationship. We also explore the operating mechanisms, and find robust evidence in support of a dual link. First, industries that ship products to high-income destination export higher quality goods (as measured by the average unit value of exports within industries). This is because high-income countries demand high-quality products. Second, the provision of quality is costly and requires more intensive use of higher-wage skilled labor. As a result, the production of higher quality products at the industry level creates a wage premium and conduces to higher average industry wages.

Evaluating foreign trade specialization and qualitative competitiveness of a transition economy: the case of Macedonia

A certain country can increase production and welfare only if it produces in industries in which price is not the single factor explaining the competitive edge. This paper attempts to assess the qualitative competitiveness of Macedonia as a candidate country for European Union (EU) accession. EU remains a main trading partner of the country, making up around two-thirds of its foreign trade. Having a small economy implies that Macedonia has to rely mainly on export-led growth. As such, addressing external competitiveness has become a more prominent issue than ever before, while improving the competitiveness is quite important in terms of EU accession. We calculate unit values to signal the Macedonia’s quality position, and then perform a country-specific segmentation of markets according to the revealed price elasticity concept (REVELAST 1). The findings suggest that Macedonia exhibits low export unit values due to the country’s specialization mostly in industries at the lower end of the quality spectrum. The analysis of product groups indicates a certain weakening—inadequate position prevails both for the levels and the type of competitive performance. The rising number of product groups in the segment with structural problems is particularly worrisome, and specifically for sectors which are the most important for achieving competitiveness with dynamic potentials. The only way for Macedonia to establish an adequate structure of foreign trade and higher levels of competitiveness is to create an appropriate environment, so that some product groups of this segment move into the segments of successful quality—and/or price competition.

Bright Past, Shady Future? Past and Potential Future Export Performance of CEE Countries in a Comparative Perspective

In this paper we examine the reasons behind the remarkable export performance of transition economies in the last two decades. Following Redding and Venables (2004, 2004a) and Fugazza (2004), we decompose export performance into the gains due to the advantageous access to foreign markets and export gains on the side of the internal supply capacity. We find that size of the economy, inward FDI penetration, most notably in the manufacturing sector, export unit values, denoting the structural changes of CEECs’ exports, and the quality of institutions and infrastructure had significant positive impact on exporting country’s supply capacity, while productivity had a negative impact. The latter is mostly due to unfavourable trends in ULC since the accession. Unlike in EU-15 and BRIC countries, the internal supply capacity is becoming decreasingly important as base of CEECs export performance. At the same time, trends in cost competitiveness are worsening relative to competing countries, while benefits of EU accession have been mostly exploited. This may compromise the CEECs’ future export growth.

Multinational exposure, export variety and price: Evidence from Chinese electronics exporters

Using a matched firm-transaction dataset on the electronics industry in China, we provide one of the first attempts to examine whether foreign direct investment (FDI) has direct impacts on the export prospects of domestic firms, in terms of export variety and unit price. Using measures of multinational presence constructed at region and industry levels, our results reveal little evidence of multinational spillovers arising from an increase in the export variety of domestic firms. The growing presence of multinational firms has a strongly negative association with the export unit value of domestic firms, suggesting that exposure to multinational firms may intensify the competition in the product market and force local firms to offer lower-value products in the international markets. This adverse influence is mainly driven by processing trade as opposed to ordinary trade, with private firms being less affected by export spillovers than state-owned enterprises. We also find that the productivity of firms can mitigate the negative effect of the exposure to multinational firms on the unit value of exports.

Bright past, shady future? Past and potential future export performance of CEE countries in a comparative perspective

This article examines the reasons behind the remarkable export performance of transition economies in the last two decades. Following Redding and Venables and Fugazza, we decompose export performance into the gains due to the advantageous access to foreign markets and export gains on the basis of internal supply capacity. We find that size of the economy, inward FDI penetration, most notably in the manufacturing sector, export unit values, denoting the structural changes of CEECs' exports, and the quality of institutions and infrastructure had a significant positive impact on exporting countries' supply capacity, while productivity had a negative impact. The latter is mostly due to unfavourable trends in ULC since EU accession. Unlike in EU-15 and BRIC countries, internal supply capacity is becoming decreasingly important as a basis of CEECs' export performance. At the same time, trends in cost competitiveness are worsening relative to competing countries, while benefits of EU accession have been mostly exploited. This may compromise the CEECs' future export growth.