Income Inequality and Export Prices Across Countries

41 Pages Posted: 9 Jul 2013

See all articles by Lisandra Flach

Lisandra Flach

Ludwig Maximilian University of Munich (LMU)

Eckhard Janeba

University of Mannheim - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

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Date Written: June 30, 2013

Abstract

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

Suggested Citation

Flach, Lisandra and Janeba, Eckhard, Income Inequality and Export Prices Across Countries (June 30, 2013). CESifo Working Paper Series No. 4298, Available at SSRN: https://ssrn.com/abstract=2290900

Lisandra Flach

Ludwig Maximilian University of Munich (LMU) ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539
Germany

Eckhard Janeba (Contact Author)

University of Mannheim - Department of Economics ( email )

L7, 3-5
D-68131 Mannheim
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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