Price, Quality, and Variety: Measuring the Gains from Trade in Differentiated Products
American Economic Journal: Applied Economics
vol. 6,
no. 4, October 2014
(pp. 66-89)
Abstract
This paper explores the gains from trade in differentiated products from three channels: decreases in price, improvements in quality, and increases in variety. Using data on Indian imports of computer printers from 1996 to 2005, a period of trade liberalization, I find that quality was the leading source of welfare gains. Consumers would require a 65 percent decrease in all 1996 prices to be as well off as they were with the quality available in 2005. The contribution of price was slightly smaller, while variety lagged farther behind. These effects varied across buyers, as gains were largest for small businesses.Citation
Sheu, Gloria. 2014. "Price, Quality, and Variety: Measuring the Gains from Trade in Differentiated Products." American Economic Journal: Applied Economics, 6 (4): 66-89. DOI: 10.1257/app.6.4.66Additional Materials
JEL Classification
- F13 Trade Policy; International Trade Organizations
- F14 Empirical Studies of Trade
- L11 Production, Pricing, and Market Structure; Size Distribution of Firms
- L63 Microelectronics; Computers; Communications Equipment
- O19 International Linkages to Development; Role of International Organizations
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