Income Inequality and Export Prices Across Countries
41 Pages Posted: 9 Jul 2013
Date Written: June 30, 2013
This paper provides first firm-level evidence of the links between income inequality and the patterns of trade and export prices. We identify a theoretical mechanism behind these links, which suggests that a more unequal income distribution leads to higher average prices. We test the theory using detailed data for Brazilian exporters and find that the destination countries’ first and second moment of the income distribution are important determinants of export prices. Controlling for income per capita, prices are systematically higher in more unequal countries, with this effect being particularly relevant for middle-income countries and holding only for differentiated goods.
Keywords: export prices, income distribution, product quality, markups
JEL Classification: F120, F140, L110
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