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John Romalis, Chicago Booth Print
Wednesday, 07 December 2011, 16:30 - 18:00

International Prices and Endogenous Quality

Abstract

The unit value of internationally traded goods are heavily influenced by quality. We model this in an extended monopolistic competition framework, where in addition to choosing price, firms simultaneously choose quality. We employ a demand system to model consumer demand whereby quality and quantity multiply each other in the utility function. In that case, the quality choice by firms’ is a simple cost-minimization sub-problem. We estimate this system using detailed bilateral trade data and sectoral wage data for over 150 countries for 1984-2008. Our system identifies quality-adjusted prices from which we will construct price indexes for imports and exports for each country, that will be incorporated into the next generation of the Penn World Table.

Location: NBB Room A1
Contact: Yvette Vandenbosch
Please reply by email to Yvette.Vandenbosch@nbb.be if you wish to participate to this seminar. With name and car plate number to access the NBB Parking Warmoesberg 41. This seminars is co-organised with UGhent and UMons

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