Average income, income inequality and export unit values

Hélène Latzer (1, 2) , Florian Mayneris (3, 4)

1 CES - Centre d'économie de la Sorbonne
2 CEREC
3 UQAM - Université du Québec à Montréal = University of Québec in Montréal
4 CEPR - Center for Economic Policy Research

This paper analyses the relationship between a country’s income distribution and its exports’ unit values. Using bilateral export flows, we not only confirm the positive association between a country’s average income and its export unit values, but further identify a heterogeneous relationship with income inequality: we find a greater income spread to be associated with higher export unit values in the case of poor countries only. These results are robust to the inclusion of controls for other determinants of export unit values, as well as to the use of alternative measures of income inequality and of the quality index. We finally discuss various theoretical rationalisations for this heterogeneous relationship between income inequality and the quality content of exports along the average income dimension, and show suggestive evidence that demand-side mechanisms can account for it, at least partly.

Keywords: Income distribu...; Export unit val...; Product quality...; Home market eff...

Domains: Humanities and Social Sciences; Economics and Finance

Hélène Latzer, Florian Mayneris. Average income, income inequality and export unit values. Journal of Economic Behavior and Organization, 2021, 185, pp.625-646. ⟨10.1016/j.jebo.2021.03.002⟩. ⟨hal-03515766⟩