Trade performances, product quality perceptions and the estimation of trade price-elasticities

Matthieu Crozet (1) , Hélène Erkel-Rousse (1, 2)

1 TEAM - Théories et Applications en Microéconomie et Macroéconomie
2 DP - Direction de la Prévision

Traditional trade models ignoring the dimension of product quality generally lead to excessively low trade price elasticities. In this paper, we show that higher estimated trade price elasticities, more in conformity with theory, can be obtained by controlling product quality in trade equations. To do so, we have estimated trade equations including a product quality proxy derived from survey data. Our estimation results, based on panel data for the four main EU member States, confirm the part played by product quality in the estimation of trade price elasticities, at least for traditionally highly differentiated products.

Mots clés: Trade performances; trade equations; trade price elasticities; imperfect competition; <br />product differentiation; quality; unit value indices

Domaines: Economies et finances

Matthieu Crozet, Hélène Erkel-Rousse. Trade performances, product quality perceptions and the estimation of trade price-elasticities. Review of International Economics, 2004, 12 (1), pp.108-129. ⟨halshs-00096826⟩