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N° 2010-07 |
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| March 2010 |
| Crises and the Collapse of World Trade: the Shift to Lower Quality |
Antoine Berthou
Charlotte Emlinger |
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| One of the most striking features of the crisis that started during the fall of 2008 has been the
sharp decrease in the world volume of trade in goods. The collapse of trade values has been
even larger, leading to a decrease of import price indices. We argue that the decrease of
import price indices can be explained by a decrease of the demand addressed to the most
expansive varieties. Descriptive statistics for the EU15 confirm that the decrease in the import
price index is mainly due to a loss in market shares by high price varieties. The estimation of
import demand equations confirm that higher price varieties report a larger elasticity with
respect to GDP variations, as compared to low price varieties. Countries specialized over high
quality varieties are expected to lose more trade in periods of global turmoil, and experience a
faster recovery. |
Non-technical summary  |
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Résumé
non-technique
en français |
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| Full text |
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| Global crisis; income elasticity; quality ladders |
Keywords |
| E31; F14; F41 |
JEL classification |
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