Norway is the world´s second largest seafood exporter, and the leading exporter of farmed salmon. A large number of firms export seafood to 145 different markets. When excluding oil and gas, seafood accounts for about 1/4 of the total Norwegian export, with aquaculture products accounting for 70 % of the value. Consequently, this industry’s performance in competitive export markets is important for the Norwegian economy. In this paper, we utilize highly disaggregated custom data to investigate the impact of quality and market share, respectively, on exporters achieved unit value in export markets.
In the trade literature, distance is used to explain differences in achieved export prices between markets (countries). Exporters typically upgrade quality and charge higher prices in more distant markets as this may serve to reduce the importance of transportation costs. However, distance and trade costs may also contribute to reduce the number of trading firms and as such weaken the competition in the market. In empirical work, quality is hard to measure and separate from other components that effect prices.
In this paper, we construct an index variable for quality related to Norwegian seafood export. To identify high quality exporters of a specific product, we utilize observed variation in unit value among exporters in different markets. An exporter that obtain an above average unit value in most markets, will typically achieve a high index value for quality. We include the quality variable in a standard gravity model where we, i.a., control for distance, as well as the exporter’s market share to a specific importer-market combination. For different seafood product, the results will indicate the impact of quality and market share, respectively, on achieved unit value, when controlling for normal gravity variables. We are particularly interested in documenting differences between aquaculture and traditional fisheries.