Daniel Nguyen: "The Desire for Quality across Products and Destinations"

Recent theories of international trade have disparate predictions concerning the correlation
between a firm level prices and sales. To test these theories, I estimate the correlation between
firm prices and sales within a market. I do this for all six‐digit products and destination countries to
which Denmark exports between 1999‐2006. I find that most Danish exports are to markets in
which the price is positively correlated with sales, that these correlations are significantly different
across destinations for a given product, and that most of them constant across years. While some
of the existing theories perform better than others at predicting these patterns, none of them can
reconcile the variation across destinations. To fully explain the patterns, I introduce a model in
which the desire for high quality goods over low cost substitutes differs across countries and
products. Even when controlling for endogenous selection, I find that countries with higher
incomes desire more quality.