DP9985 Export Destinations and Input Prices

Author(s): Paulo Bastos, Joana Silva, Eric A Verhoogen
Publication Date: May 2014
Keyword(s): inputs, international trade, Portugal, prices, product quality
JEL(s): F1, L1, O1
Programme Areas: International Trade and Regional Economics
Link to this Page: http://www.cepr.org/pubs/dps/DP9985

This paper examines the extent to which the destination of exports matters for the input prices paid by firms, using detailed customs and firm-product-level data from Portugal. We use exchange-rate movements as a source of variation in export destinations and find that exporting to richer countries leads firms to charge more for outputs and pay higher prices for inputs, other things equal. The results are supportive of the hypothesis that an exogenous increase in average destination income leads firms to raise the average quality of goods they produce and to purchase higher-quality inputs.