Domestic productivity and variety gains from trade
نویسندگان
چکیده
JEL classification: F1 F12 We show theoretically and confirm empirically that domestic productivity has a significant impact on the demand for foreign varieties under the assumption that domestic and foreign varieties are imperfect substitutes. In particular, the demand for imported varieties ismore elastic for countries with comparative advantage. For an average good facing a median trade barrier, doubling the importer–exporter relative export performance decreases the number of imported varieties by 17%. Ourfindings suggest that the variety gains estimates could be significantly biased if we ignore the substitutability between imported and domestic varieties.
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