Measuring the benefits of foreign product variety with an accurate variety set

Recent studies have used import data to assess the Impact of foreign varieties on domestic prices and welfare We employ a market based data set on the US automobile market that allows us to define goods varieties at a more precise level as well as discern location of production and ownership of varieties Our estimates of price and welfare changes from new varieties in the US automobile sector are twice as large as standard estimates when using our detailed market-based data We also show that new varieties Introduced by foreign-owned affiliates provided an additional 70% welfare gain during our sample (C) 2010 Elsevier B V All rights reserved