What Drives the Market Share Changes? Price versus Non-Price Factors

46 Pages Posted: 14 Mar 2014

See all articles by Konstantins Benkovskis

Konstantins Benkovskis

Bank of Latvia; Stockholm School of Economics in Riga

Julia Wörz

Oesterreichische Nationalbank (OeNB)

Multiple version iconThere are 2 versions of this paper

Date Written: February 3, 2014

Abstract

The paper proposes a theoretical framework for explaining gains and losses in export market shares by considering both price and non-price determinants. Starting from a demand-side model à la Armington (1969), we relax several restrictive assumptions to evaluate the contribution of unobservable changes in taste and quality, taking into account differences in elasticities of substitution across product markets. Using highly disaggregated trade data from UN Comtrade, our empirical analysis for the major world exporters (G7 and BRIC countries) reveals the dominant role of non-price factors in explaining the competitive gains of BRIC countries and concurrent decline in the G7’s share of world exports.

Keywords: export market share decomposition, non-price competitiveness, real effective exchange rate

JEL Classification: C43, F12, F14, L15

Suggested Citation

Benkovskis, Konstantins and Wörz, Julia, What Drives the Market Share Changes? Price versus Non-Price Factors (February 3, 2014). ECB Working Paper No. 1640. Available at SSRN: https://ssrn.com/abstract=2390092

Konstantins Benkovskis (Contact Author)

Bank of Latvia ( email )

Riga
Latvia

Stockholm School of Economics in Riga ( email )

Strelnieku iela 4a
Riga, LV 1010
Latvia

Julia Wörz

Oesterreichische Nationalbank (OeNB) ( email )

Otto-Wagner-Platz 3, PO Box 61
Vienna,
1010 Vienna, A-1011
Austria

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