Inventory Management, Product Quality, and Cross-Country Income Differences.
Sebastián Claro; Bernardo S. Blum; Kunal Dasgupta e Ignatius Horstmann .
American Economic Journal, Macroeconomics, forthcoming.
Abstarct: Previous research has documented that export shipments are “lumpy” – exporters make infrequent and relatively large shipments to any given export destination. This fact has been interpreted as implying that fixed, per-shipment costs and inventory management decisions play a key role in international trade. We document here that exports from poor countries are considerably more lumpy – have higher fixed per-shipment costs – than those from rich countries. Using a model of trade with inventory management, we estimate that the country at the 90th percentile of the distribution of per shipment costs has almost three times higher costs than the one at the 10th percentile. We also show that these per-shipment cost differences have a reduced-form representation given by an ad valorem trade cost that varies with export country income (as in Waugh (2010)). A calibrated version of the model that incorporates these estimates and allows for endogenous product quality reveals that cross-country differences in per-shipment costs explain almost forty percent of the observed cross-country differences in income. It also shows that policies that lower per-shipment costs can lead to significant welfare gains, mainly due to induced quality upgrading.
KEYWORDS: Inventory management, per-shipment trade cost, product quality, comparative advantage
JEL code: F10, F12