Indian buyers in global markets: Quality, prices, and productivity
We examine import prices paid by direct-sourcing Indian manufacturing firms in the early 2000s using a unique data set that matches firm characteristics with product and source-country trade data, offering a theoretical and empirical extension of Halpern and Koren (2007). We find that import prices are positively associated with firm productivity, distance from source-country, and source-country GDP per capita, and negatively associated with source-country remoteness, an effect we attribute to the higher scope for quality differentiation in less remote locations. Further, we find that source-country characteristics matter more, and cost factors less, for differentiated than for non-differentiated goods.
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