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Exporter heterogeneity and price discrimination: A quantitative view

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  • Jung, Jae Wook
  • Simonovska, Ina
  • Weinberger, Ariel

Abstract

We quantify a general equilibrium model of international trade and pricing-to-market that features firm-level heterogeneity and consumers with non-homothetic preferences—generalized CES (GCES). We demonstrate theoretically that, relative to existing frameworks, the GCES model exhibits features of the data that are essential to conduct quantitative analysis. The framework can reconcile the documented price dispersion across firms and markets, while maintaining consistency with cross-sectional observations on firm productivity, markups, and sales. We estimate the model's parameters to match bilateral trade flows across 66 countries as well as moments from the markup and sales distributions of Chilean firms. The model reconciles both micro and macro facts quantitatively, and yields trade elasticity estimates that are in line with the existing literature. Hence, we conclude that the GCES model constitutes a plausible and parsimonious quantitative workhorse framework that can be used to analyze gains from trade.

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  • Jung, Jae Wook & Simonovska, Ina & Weinberger, Ariel, 2019. "Exporter heterogeneity and price discrimination: A quantitative view," Journal of International Economics, Elsevier, vol. 116(C), pages 103-124.
  • Handle: RePEc:eee:inecon:v:116:y:2019:i:c:p:103-124
    DOI: 10.1016/j.jinteco.2018.09.011
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    Cited by:

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    2. Martin Alfaro, 2022. "The microeconomics of new trade models," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(3), pages 1539-1565, August.
    3. Macedoni, Luca & Weinberger, Ariel, 2019. "Quality Heterogeneity and Misallocation: The Welfare Benefits of Raising your Standards," MPRA Paper 95529, University Library of Munich, Germany.
    4. Reto Foellmi & Christian Hepenstrick & Zweimüller Josef, 2018. "International Arbitrage and the Extensive Margin of Trade between Rich and Poor Countries," Review of Economic Studies, Oxford University Press, vol. 85(1), pages 475-510.
    5. Luca Macedoni, 2022. "Monopsonistic competition, trade, and the profit share," Scandinavian Journal of Economics, Wiley Blackwell, vol. 124(2), pages 488-515, April.
    6. Jung, Jae Wook & Simonovska, Ina & Weinberger, Ariel, 2019. "Exporter heterogeneity and price discrimination: A quantitative view," Journal of International Economics, Elsevier, vol. 116(C), pages 103-124.
    7. Weinberger, Ariel, 2020. "Markups and misallocation with evidence from exchange rate shocks," Journal of Development Economics, Elsevier, vol. 146(C).
    8. Demidova, Svetlana, 2017. "Trade policies, firm heterogeneity, and variable markups," Journal of International Economics, Elsevier, vol. 108(C), pages 260-273.
    9. McCalman, Phillip, 2020. "International trade, product lines and welfare: The roles of firm and consumer heterogeneity," Journal of International Economics, Elsevier, vol. 126(C).
    10. Nocco, Antonella & Ottaviano, Gianmarco I.P. & Salto, Matteo, 2019. "Geography, competition, and optimal multilateral trade policy," Journal of International Economics, Elsevier, vol. 120(C), pages 145-161.
    11. Diego Daruich & Julian Kozlowski, 2018. "Uniform Pricing Within and Across Regions: New Evidence from Argentina," Working Papers 2018-10, Federal Reserve Bank of St. Louis.
    12. Etro, Federico, 2017. "Research in economics and monopolistic competition," Research in Economics, Elsevier, vol. 71(4), pages 645-649.
    13. Macedoni, Luca, 2022. "Large multiproduct exporters across rich and poor countries: Theory and evidence," Journal of Development Economics, Elsevier, vol. 156(C).
    14. Macedoni, Luca & Weinberger, Ariel, 2022. "Quality heterogeneity and misallocation: The welfare benefits of raising your standards," Journal of International Economics, Elsevier, vol. 134(C).

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    More about this item

    Keywords

    Variable mark-ups; Non-homothetic preferences; Generalized CES; Heterogeneous firms; International trade; Gravity;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts

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