The Desire for (Danish) Quality in High and Low Income Countries
Research output: Working paper
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The Desire for (Danish) Quality in High and Low Income Countries. / Nguyen, Daniel Xuyen.
Department of Economics, University of Copenhagen, 2011.Research output: Working paper
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TY - UNPB
T1 - The Desire for (Danish) Quality in High and Low Income Countries
AU - Nguyen, Daniel Xuyen
N1 - JEL classification: F12
PY - 2011
Y1 - 2011
N2 - 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.
AB - 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.
KW - Faculty of Social Sciences
KW - exports
KW - firm heterogeneity
KW - productivity
KW - Kuznets
M3 - Working paper
BT - The Desire for (Danish) Quality in High and Low Income Countries
PB - Department of Economics, University of Copenhagen
ER -
ID: 32472878