Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/297882 
Year of Publication: 
2020
Series/Report no.: 
Working Paper No. 2020-05
Publisher: 
Prague University of Economics and Business, Faculty of International Relations (FIR), Prague
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 incomes, 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 the home-market effect linked to nonhomothetic preferences is a key driver of such patterns of quality specialization.
Subjects: 
Inferred quality
Nonhomothetic CES
Home-market effect
Quality Specialization
JEL: 
F1
F14
Document Type: 
Working Paper

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