Stephen L. S. Smith

Can Price Dispersion Reveal Distance-Related Trade Costs? Evidence from the United States

Abstract We offer insights on how distance-related trade costs may best be inferred from price-dispersion measures. Using a simple spatial model of price dispersion, we argue that measures of price dispersion that are not spatially informed can mislead researchers into concluding that distance-related costs are small even when such costs are the major determinant of price dispersion. With intra-United States data on eleven goods, we find that distance-related costs are large and are indeed underestimated when inferred from standard, non-spatial, price dispersion measures. Our empirical findings have implications for studies of market integration policies (such as trade liberalization and currency unions) and the significance of economic geography.

Ethnic Networks and Price Dispersion

We offer and test a model linking ethnic networks to global price dispersion which predicts lower price dispersion as shared ethnic populations between countries rise, effects that may reverse at higher levels as network discipline breaks down. Using Chinese, Indian and Japanese data, we find that country pairs linked by the Chinese network have significantly lower mean price dispersion. A one standard deviation increase in the size of the Chinese coethnic network lowers price dispersion by 6–33%, an effect that reverses as the network gets large. No such evidence exists for the Indian or Japanese networks.

GLOBAL POVERTY: ACADEMICS AND PRACTITIONERS RESPOND

Abstract Concern about global poverty has recently been increasing in public and private circles and in the church. However, we must recognize that poverty is complex and multidimensional, and solutions will be also. Our solutions need to embody good stewardship by understanding the needs, interests, and incentives of poor communities. Thenacademics and practitioners can partner together, combining their knowledge and experience to research, design, and evaluate effective poverty reduction programs. Supporting efforts that embrace research and evaluation as tools for good stewardship will help generosity translate into real help for poor people.

Price Dispersion in Spatial Perspective: Theory and Evidence

We develop a simple Hotelling spatial-trade model of price dispersion to examine how distance-related costs affect price dispersion, and we offer some insights on how such costs may best be inferred from price-dispersion measures. Our theoretical model suggests that measures of price dispersion that are not spatially-informed can mislead researchers into concluding that distance-related costs are small even when such costs are the major determinant of price dispersion. In estimates based on price dispersion across U.S. cities of eleven goods, we find that distance-related costs are large and are indeed under-estimated when inferred from standard, non-spatial, price dispersion measures.

Firm Heterogeneity, Imported Input Quality, and Export Pricing in India

Abstract Using a novel dataset we examine the pricing behavior of Indian exporters, in particular looking at the relationship between export prices and the quality of imported inputs that firms use, conditioning on firm capability (productivity). Exporting firms that directly import are different in important ways from exporters that do not import directly. Among directly importing exporters, higher quality (higher price) imports are associated with higher quality (higher price) exports. In this respect, Indian exporters behave similarly to other developing country exporters, offering suggestive evidence of the importance for export success of access to high-quality imports.

Work as a disutility: Comment

Abstract In a recent article in this journal, Robert E. Lane (1992) examined the economists notion of the “marginal disutility of labor.” Christian views of labor are one of several perspectives singled out for fostering the idea that labor is painful and that work entails a decrease in happiness. This article corrects Lanes misinterpretation of Christian teaching on work. Lane failed to distinguish between the concepts of creation, fall, and redemption, which drew him to the erroneous conclusion that the Bible pictures work as a source of unhappiness. By separating these concepts, we demonstrate the Bibles high view of work, and also refute Lanes claim that Christians after the reformation relied on guilt as a motivating force for labor.