Distance to destination and export price variation within agri-food firms

Abstract

This paper assesses how bilateral distance affects within-firm-product variation in free-on-board (FOB) export prices across destinations. I estimate linear models that regress firm-product-destination-time FOB unit values on distance, firm-product-time fixed effects and destination country controls. If distance doubles, the average Swiss agrifood firm increases its FOB export price by 2.3 per cent. However, the positive distance elasticity of export prices reflects product quality differences and/or variable markups. I disentangle both mechanisms and show that, for a given product quality, exporting firms charge higher markups in distant markets. Nevertheless, this form of price discrimination is less pronounced for higher-quality products.