Abstract: By making use of the Customs Data of China in 2006, this paper studies the impact of geographic distance on FOB prices and analyses the economic significance of the heterogeneity of the impact, the theoretic mechanisms and the estimated results. The findings show that: (1) geographic distance has a significant positive effect on FOB prices, each time the distance is doubled, the FOB price charged by export firms will increase by 8.74%; (2) as for the industries with different degrees of product differentiation and enterprises of different sizes, the impact of geographic distance on FOB prices shows a heterogeneity; (3) the theoretic mechanism of the impact probably due to the facts that the firms having charged higher markup percentage, sold products with higher quality, or used more expensive packing materials and methods due to farther transportation distances; (4) a simple decomposition of the elasticity of import prices to distance shows that, after the transportation cost is decreased, the 95% drop of the import prices enjoyed by consumers is because the enterprises have charged lower FOB prices, which suggests that the changes of transportation costs may become a new source of welfare that consumers can enjoy.

Key words: geographic distance, FOB prices, transportation costs, heterogeneous firms