On the Measurement of Product Variety in Trade

Abstract

Product variety plays an important role in the theoretical work on monopolistic competition and trade, and recent empirical work has begun to quantify this for aggregate and disaggregate import demands. The objective of this paper is to discuss the measurement of product variety in trade, using a broad cross-section of advanced and developing countries and disaggregating across sectors. We calculate the export variety of countries in their sales to the United States, and relate the export variety indexes to country productivities. We confirm that countries with greater product variety in exports also have higher productivity. This may be due to their own development of, and access to, these products.

The Long and Short (Run) of Trade Elasticities

“…In their Handbook chapter Head and Mayer (2014, p. 162) recommend including bilateral fixed effects. Indeed, some papers in the literature control for bilateral unobservables via either bilateral fixed effects (see, among others, Lai and Trefler, 2002;Baier and Bergstrand, 2007;Shapiro, 2016;Donaldson, 2018), or time-differencing (e.g Feenstra, 1994;Head and Ries, 2001;Romalis, 2007;Imbs and Mejean, 2015). For this reason, our estimating equations are time-differenced, which removes all time-invariant importer-exporter-product-specific determinants of bilateral product-level trade flows.…”

“…3 An alternative is to estimate an elasticity of substitution structurally (e.g. Feenstra, 1994;Broda and Weinstein, 2006;Feenstra et al, 2018;Soderbery, 2015Soderbery, , 2018Fajgelbaum et al, 2020). In some environments the elasticity of substitution (or demand elasticity) governs the trade elasticity, but in many others, such as the Melitz or Eaton-Kortum models, it does not.…”

Does aid for trade diversify the export structure of recipient countries?

“…Export diversification therefore is one of the most crucial components in measuring the effectiveness of aid for trade from the viewpoint of recipient countries. Export diversification, for which a diversification of production is a necessary condition, forms an essential part of economic development, since it implies that productivity in a variety of industries is increasing (Feenstra & Kee, 2004). In other words, recipient countries regard export diversification as one of the most important objectives since it is linked to almost all other development goals such F I G U R E 1 Main goals recipients want to achieve through aid for trade.…”

Tertiary industries’ value-added as a linkage’s engine: An interstate input-output application for Brazilian regions

“…Furthermore, TiVA measures provide the idea that intermediate inputs can affect the production process other than the trade in final goods, leveraging the promotion of services linkages throughout the intra and interregional production networks. The latter focus on vertical specialization allows for identifying market opportunities to add more value to production and increase regional trade competitiveness (Feenstra & Kee, 2004;Gereffi, 2019b).…”