Why do within firm-product export prices differ across markets? Evidence from Hungary
In this paper we analyse the relationship between distance and f.o.b. export unit values using firm-product-destination data from Hungarian manufacturing. By using 10-digit harmonized system data, we show that a doubling of distance is associated with about 7.5\% increase in the average product-level price, from which 5 percentage points can be attributed to within firm-product variation. We run a number of tests to look for heterogeneity in this pattern. Interestingly, the measured effect is very similar for domestic and foreign firms but distance seems to matter somewhat more for EU countries than otside the EU. We do not find much evidence for heterogenity across product categories based on measures of vertical differentiation. The level of product aggregation matters, the distance coefficient is larger when products are aggregate to the 8 or 6-digit level.