Surviving the U.S. Import Market: The Role of Product Differentiation

34 Pages Posted: 4 Mar 2004 Last revised: 14 Mar 2021

See all articles by Tibor Besedes

Tibor Besedes

Georgia Institute of Technology

Thomas J. Prusa

Rutgers University

Date Written: February 2004

Abstract

We examine the extent that product differentiation affects the duration of US import trade relationships. Applying nonparametric and semiparametric techniques to highly disaggregated product-level data we estimate that the hazard rate is at least 18 percent higher for homogenous goods than for differentiated products. Put another way, the median survival time for trade relationships involving differentiated products is five years as compared to two years for homogenous products. We find that our results are not only highly robust but often are strengthened under alternative specifications. For instance, if we define trade relationships using industry-level rather than product-level data we find that the hazard rate is 30-35 percent higher for homogenous goods than for differentiated products. We also find that the survival ranking across product types holds across individual industries. We show that dropping the smallest trade relationships further accentuates the differences among product types. We also control for the possible measurement error in measuring spell lengths and the role of multiple spell relationships and find that in all cases the differences among products types are greater than in our benchmark analysis.

Suggested Citation

Besedes, Tibor and Prusa, Thomas J., Surviving the U.S. Import Market: The Role of Product Differentiation (February 2004). NBER Working Paper No. w10319, Available at SSRN: https://ssrn.com/abstract=509850

Tibor Besedes

Georgia Institute of Technology ( email )

221 Bobby Dodd Way
Atlanta, GA 30332-0615
United States

Thomas J. Prusa (Contact Author)

Rutgers University ( email )

Dept of Economics
75 Hamilton St
New Brunswick, NJ 08901
United States
848-932-8646 (Phone)
732-932-7416 (Fax)

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