What drives the market share changes? Price versus non-price factors

The paper proposes a theoretical framework for explaining gains and losses in export market shares by considering both price and non-price determinants. Starting from a demand-side model à la Armington (1969), we relax several restrictive assumptions to evaluate the contribution of unobservable changes in non-price factors (e.g. taste and quality), taking into account differences in elasticities of substitution across product markets. Using highly disaggregated annual trade data from UN Comtrade between 1996 and 2014, our empirical analysis reveals the dominant role of non-price factors in explaining the market share gains of BRIC countries and concurrent decline in the G7 share of world exports.