Eric Verhoogen (Columbia University). “Markups and Quality: Evidence from Colombian Coffee Exports”
Abstract: Drawing on internal records from a Colombian coffee processer and exporter, we explore the relationship between markups and different dimensions of product quality, all of which can be precisely measured. We find that higher-quality coffee is sold at a higher markup, that this correlation holds within buyers. We explore the conditions under which suppliers of the main input (unmilled “parchment” coffee) are paid quality premia. We also show that standard methods for estimating markups may be misleading in this context.
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