Why firms set different export prices? Evidence from Spain

ABSTRACT

Using firm-level export data for the 2010–2014 period, we investigate the variation of export prices across and within Spanish manufacturing firms. We find that more productive firms set higher export prices. However, this result is not robust to controlling for other firm-level characteristics and alternative productivity measures. We show that firms set higher export prices in more distant markets and in destinations with high GDP per capita, and lower export prices in large and low-competition markets. These latter results suggest that firms adjust the quality of their products to destination characteristics.

KEYWORDS:

• Export
• export prices
• quality
• Spain

JEL CLASSIFICATION:

• F10
• F14
• F23

Acknowledgements

We thank Francisco Olarte and the Department of Customs and Excise of the Spanish Tax Agency (AEAT) for providing essential information for this article. This work was supported by the Spanish Ministry of Economy and Competitiveness under Grant MINECO: [Grant Numbers ECO2015-68057-R and ECO2016-79650-P], co-financed with FEDER, the Basque Government Department of Education, Language Policy and Culture: [Grant Number IT885-16] and the Generalitat Valenciana: [Grant Number Prometeo II-2014-053].

Disclosure statement

No potential conflict of interest was reported by the authors.

Supplemental material

Supplemental data for this article can be accessed here.

Notes

¹ We take several steps to remove outlier unit values and clean the database. (1) We remove all transactions with a value below 1500 euros; (2) we drop observations for which the unit value is 5 times higher or lower than the product and firm-specific median unit value in all destinations. (3) We exclude export operations of petroleum, tobacco and printing products. (4) We remove export transactions with Andorra and Gibraltar and from the Canary Islands, Ceuta and Melilla.

² The online Appendix explains in detail how TFP is estimated.

³ Note that the coefficients on distance and GDP are the opposite to the ones predicted by Melitz and Ottaviano (2008), who expect lower mark-ups in more distant and larger markets.

Additional information

Funding

This work was supported by the Generalitat Valenciana: [Grant Number Prometeo II-2014-053], Spanish Ministry of Economy and Competitiveness: [Grant Numbers ECO2015-68057-R and ECO2016-79650-P] and Basque Government Department of Education, Language Policy and Culture: [Grant Number IT885-16].