The Desire for (Danish) Quality in High and Low Income Countries

Daniel Xuyen Nguyen

The Desire for (Danish) Quality in High and Low Income Countries

Daniel Xuyen Nguyen

Økonomisk Institut

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Abstract

We estimate the correlation between firm prices and sales within a CN8 product-country-year market. We do this for every market to which at least 16 different
Danish firms exported between 1999 and 2006. Approximately 60% of Danish exports are to markets in which the price is negatively correlated with sales. These correlations are significantly different across destination countries within product categories, but across years for a given product-destination pair. While some existing theories perform better than others at predicting these patterns, none can reconcile the variation across countries. To fully explain the patterns, We introduce a model in which the price-sales correlation can be interpreted as the market's desire for high quality goods over low cost substitutes. We discover an inverted U shaped relation between a country's desire for quality and its per capita GDP, which we term a Quality Kuznets Curve. This curve has a turning point around 10 000 Euros for Danish exports. The Quality Kuznets Curve appears both when looking across products and within products.

Originalsprog	Engelsk
Udgiver	Department of Economics, University of Copenhagen
Antal sider	21
Status	Udgivet - 2011

Emneord

Det Samfundsvidenskabelige Fakultet
exports
firm heterogeneity
productivity
Kuznets

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Citationsformater

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