Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture
David L. Hummels
Purdue University - Department of Economics; National Bureau of Economic Research (NBER)
Alexandre M. Skiba
University of Kansas - School of Business
NBER Working Paper No. w9023
We model demand for quality differentiated goods to derive a relationship between trade costs and the quality composition of trade. Detailed data on traded goods' prices, quantities and shipping costs for many importers and exporters are used to test these predictions. These data provide a strong rejection of the iceberg assumption on transportation costs and a strong confirmation of the classical Alchian Allen hypothesis. Within a narrowly defined commodity classification, exporters charge destination-varying prices that co-vary positively with shipping costs and negatively with tariffs. Shipping costs operate as a quantitative restriction similar to quotas.
Number of Pages in PDF File: 28working papers series
Date posted: June 21, 2002
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