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N° 2006-17 |
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| November 2006 |
| Import Prices, Variety and
the Extensive Margin of Trade |
Guillaume Gaulier
Isabelle Méjean |
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| This paper studies the aggregate price effect of newly imported varieties and compares it in
a sample of countries. The method allows to quantify the measurement bias in import price
indices that take as given the basket of imported varieties and neglect the aggregate effect
of increased diversity. Applying it to the BACI database describing bilateral trade flows at
the world level, we are able to compare the aggregate price impact of the extensive margin of
trade among 28 countries. Our results suggest that, in the 1994-2003 period, neglecting newly
imported varieties leads to overestimate in the import price level by 0.2% a year, on average.
The magnitude of this effect however strongly varies across countries, this overestimation
being especially strong in some emerging countries like India, Indonesia or Brazil. |
Abstract |
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| Extensive margin, import price indices, real exchange rate determinants, panel
data |
Keywords |
| F10, F12, F41 |
JEL classification |
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