Stephen Redding, David Weinstein, 02 January 2018

Existing research on export heterogeneity between countries has typically focused on the importance of individual factors. This column presents a unified framework for understanding these contributions in concert. Using US and Chilean data, it demonstrates that products within firms, firms within sectors, and sectors in aggregate are indeed imperfect substitutes. It further shows that models that assume no quality shifts and no changes in variety perform poorly on trade data.

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