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The Gains from Input Trade with Heterogeneous Importers

Author

Listed:
  • Joaquin Blaum
  • Claire Lelarge
  • Michael Peters

Abstract

Firms differ substantially in their participation in foreign input markets. We develop a methodology to measure the aggregate effects of input trade that takes such heterogeneity into account. We provide a theoretical result that holds in a variety of settings: the firm-level data on value added and domestic expenditure shares in material spending is sufficient to compute the change in consumer prices due to a shock to the import environment. We characterize the bias of approaches that rely on aggregate statistics. In an application to French data, input trade reduces the prices of manufacturing products by 27 percent.

Suggested Citation

  • Joaquin Blaum & Claire Lelarge & Michael Peters, 2018. "The Gains from Input Trade with Heterogeneous Importers," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(4), pages 77-127, October.
  • Handle: RePEc:aea:aejmac:v:10:y:2018:i:4:p:77-127
    Note: DOI: 10.1257/mac.20160426
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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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