Quality, distance and trade: A strategic approach

Abstract

This paper contributes to the literature on distance and quality by identifying a force contributing to explain the observed increase of the quality of shipped goods with the distance of their destination market. This force originates from the influence of distance on firms' strategic behavior when the quality level of goods is a choice variable for them, and complements the ones already proposed in the literature. Our approach differs from the extant literature because it does not rely on technology or preference/income differentials to identify the determinants and drivers of trade flows. Moreover, it allows to clearly disentangle between the price setting and quality choice of firms. We find that distance has an unambiguously positive effect on the average quality of traded goods. Our results suit the empirical evidence on distance and quality and contribute to the analysis of the determinants of firms' trade performance.

The spatial dimension of productivity: Connecting the dots across industries, firms and places

“…Entrepreneurship is a prominent topic of research across several fields (Acs and Audretsch, 2006[108]), many of which fall under the umbrella of regional science. A great interest in entrepreneurship arguably comes from understanding that start-ups, particularly small and innovative ones, play a central role in economic performance of regions (Acs, 2006[109]; Audretsch and Keilbach, 2004 [110]; Birch, 1987[111]; Malecki, 1993[112]). It comes as no surprise that a vast literature tries to explain entrepreneurial activity within a subnational perspective (Acs et al, 2009[113]; Lee, Florida and Acs, 2004 [114]; Mueller, 2006[115]; Qian, Acs and Stough, 2013 [116]).…”

Measuring border effects in European cross-border regions

“…By applying a gravitational model, the seminal work of McCallum (1995) paved the way for studies aiming at estimating the costs of a border in terms of missed economic growth, also at the regional level (Andresen, 2010;Bacchiega,Minniti,&Palestini, 2016;Goffrette-Nagot, Reginster, & Thoams, 2011). This approach remains the most popular way to identify and quantify border effects; it interprets borders only through the existence of tariffs, to link the border effect to pure demand-side effects, and to take care of border effects on trade.…”

“…An international border marks the geography of trade relations and economic development patterns of countries. Most economic studies on borders quantify the effects of integration processes, by estimating the benefits of removing a border, through the elimination of tariffs (Andresen, 2010;Bacchiega et al, 2016;Goffrette-Nagot et al, 2011).…”

Globalization of markets and consumption home bias: new insights for the environment

“…The pioneering works by Thisse (1979), Shaked and Sutton (1983), and alsoChoi and Shin (1992) andWauthy (1996), analyze competition in a vertically-differentiated market when each firm sells its variant at no cost to get insights into the role of demand in the market. With a focus on environmental quality, Wang and Yang (2001),Bacchiega and Minniti (2009),Bacchiega et al (2016) andCeccantoni et al (2018) use the same assumption, inter alia.9 The model can be solved for the alternative condition u d > 2u g with no major changes in the results. Calculations are available upon request from the authors.10 Bacchiega and Minniti (2009),Bacchiega et al (2016) and Picard and Tampieri (2021) use a similar approach to model trade costs.…”

“…With a focus on environmental quality, Wang and Yang (2001),Bacchiega and Minniti (2009),Bacchiega et al (2016) andCeccantoni et al (2018) use the same assumption, inter alia.9 The model can be solved for the alternative condition u d > 2u g with no major changes in the results. Calculations are available upon request from the authors.10 Bacchiega and Minniti (2009),Bacchiega et al (2016) and Picard and Tampieri (2021) use a similar approach to model trade costs.…”