Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture

28 Pages Posted: 21 Jun 2002 Last revised: 27 Feb 2022

See all articles by David L. Hummels

David L. Hummels

Purdue University - Department of Economics; National Bureau of Economic Research (NBER)

Alexandre M. Skiba

University of Kansas - School of Business

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Date Written: June 2002

Abstract

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.

Suggested Citation

Hummels, David L. and Skiba, Alexandre (Sasha) Mykolajovych, Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture (June 2002). NBER Working Paper No. w9023, Available at SSRN: https://ssrn.com/abstract=316802

David L. Hummels (Contact Author)

Purdue University - Department of Economics ( email )

West Lafayette, IN 47907-1310
United States

National Bureau of Economic Research (NBER)

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Alexandre (Sasha) Mykolajovych Skiba

University of Kansas - School of Business ( email )

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Lawrence, KS 66045
United States