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At a Barclays conference last week, Jack Hartung, Chipotle's chief financial officer, said that there was plenty of "runway" to open new stores and that the company was slowing its development of more remote markets.
Since more-efficient firms produce higher quality, trade costs result in higher-quality exports to more remote markets.
Then, under usual assumptions on demand, this implies that shipments to more remote markets have a bigger proportion of higher-quality goods.
Hence, fixed cost of exporting to each market (together with the fact that more-efficient firms are larger) is the key mechanism in these models for the result that only the more efficient firms sell in the more remote markets.
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The mechanism usually considered is that if transport costs are not proportional to shipment's value but have a per unit component, a higher transport cost to a more remote market reduces the relative price of higher-quality exports with respect to lower-quality exports (see Hummels and Skiba 2004).
Since more-efficient firms produce higher quality, this implies that firms selling in more and more-remote markets produce higher quality.
Consequently, the reason why the less-efficient firms do not sell in the more-remote markets is their inability to produce at low enough marginal costs.
In equilibrium, more-efficient firms are larger, produce higher quality, sell in more-remote markets and employ a larger share of workers with high education and skills.
On the theoretical side, we build a model predicting that firms selling to more-remote markets employ higher human capital, pay higher wages to employees within each education group, and produce higher quality.
These latter are the concern of the Biological Branch, since unrestricted fishing results in an irregular supply, and the depletion of certain fishing regions causes a migration of fishing effort to regions more remote from markets, thus intensifying competition, elevating costs, damaging quality, and, in addition, creating international disturbances and animosities.
Geographically, the Pacific island states are more remote from world markets than their counterparts elsewhere in the world.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com