Is Trade in Differentiated Goods Different?

37 Pages Posted: 2 Feb 2005  

Tibor Besedes

Georgia Institute of Technology

Thomas J. Prusa

Rutgers University; National Bureau of Economic Research (NBER)

Date Written: January 2005

Abstract

We examine the extent to which product differentiation affects the duration of US import trade relationships. Applying nonparametric and semiparametric techniques to highly disaggregated product level data we estimate the hazard rate is at least 25 percent higher for homogenous goods than for differentiated products. The 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 46-56 percent higher for homogenous goods than for differentiated products. 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.

Keywords: Product Differentiation, Duration, International Trade

JEL Classification: F14, F19, C14, C41

Suggested Citation

Besedes, Tibor and Prusa, Thomas J., Is Trade in Differentiated Goods Different? (January 2005). Available at SSRN: https://ssrn.com/abstract=659061 or http://dx.doi.org/10.2139/ssrn.659061

Tibor Besedes (Contact Author)

Georgia Institute of Technology ( email )

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

Thomas J. Prusa

Rutgers University ( email )

Dept of Economics
75 Hamilton St
New Brunswick, NJ 08901
United States
908-932-7670 (Phone)
908-932-7416 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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