Why Do Within‐Firm-Product Export Prices Differ Across Markets? Evidence from Hungary
14 Pages Posted: 8 Jun 2017
Date Written: June 2017
In this study, we analyse the relationship between distance and f.o.b. export unit values using firm-product-destination data from Hungarian manufacturing. Using 10‐digit Harmonized System data, we show that a doubling of distance is associated with about 7.5 per cent increase in the average product‐level price, from which five percentage points can be attributed to within‐firm-product variation. We run a number of tests to look for heterogeneity in this pattern. Interestingly, the measured effect is very similar for domestic and foreign firms but distance seems to matter somewhat more for EU countries than outside the EU. We do not find much evidence for heterogeneity across product categories based on measures of vertical differentiation. The level of product aggregation matters; the distance coefficient is larger when products are aggregate to the eight or six‐digit level.
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