Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/232495 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 8898
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
This paper explores patterns of quality differentiation and specialization relying on model-level panel data of retail sales and prices of refrigerators across 23 countries in the European Union. Unlike customs data aggregated at the product category, typically used in the literature, model-level data allow us to test for the presence of nonhomotheticities by comparing market shares of identical models across different markets. We measure quality at the model level, account for varying willingness-to-pay for quality at different levels of income, and link quality measures to objective model attributes. Using originally assembled data on the country of manufacture of each model, we study patterns of quality specialization by brands with plants in multiple countries. We find that firms locate the production of their higher-quality models in richer countries, and argue that such patterns of quality specialization are driven mainly by a home-market effect linked to nonhomothetic preferences.
Subjects: 
inferred quality
nonhomothetic CES
home-market effect
quality specialization
JEL: 
F10
F14
Document Type: 
Working Paper
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