How geography affects quality

The data confirm the theoretical prediction. Non-OECD exporters who face a stronger demand for quality from richer countries charge about 10% more for all destinations. At the same time, countries whose demand is especially distorted by the Alchian-Allen effect charge 58% more. Moreover, geography is more significant to the quality choice of developing countries. Multilateral geographic factors explain 13% of the price variation for non-OECD exporters, 3% for small OECD exporters, and are not significant for OECD exporters overall.