The Pricing of Manufactured Goods during Trade Liberalization: Evidence from Chile, Israel, and Korea

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Abstract
The authors present an investigation through empirical analysis of manufacturing pricing in Chile, Israel, and Korea during periods of trade liberalization. Given different experiences in each country, it looks at how manufacturing pricing rules change during the liberalization process. The results show that the coefficients of external prices and unit labor costs can change systematically with the degree of openness of the economy, with the exchange rate becoming more important and the domestic variables less important as liberalization progresses. This finding questions the widespread use of constant coefficient models to analyze price behavior in countries that are undergoing liberalization.

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