IDEAS home Printed from https://ideas.repec.org/p/cep/cepdps/dp1513.html
   My bibliography  Save this paper

Aggregating from Micro to Macro Patterns of Trade

Author

Listed:
  • Stephen J. Redding
  • David E. Weinstein

Abstract

We develop a new framework for aggregating from micro to macro patterns of trade. We derive price indexes that determine comparative advantage across countries and sectors and the aggregate cost of living. If firms and products are imperfect substitutes, we show that these price indexes depend on variety, average demand/quality and the dispersion of demand/quality-adjusted prices, and are only weakly related to standard empirical measures of average prices, thereby providing insight for elasticity puzzles. Of the cross-section (time-series) variation in comparative advantage, 50 (90) percent is accounted for by variety and average demand/quality, with average prices contributing less than 10 percent.

Suggested Citation

  • Stephen J. Redding & David E. Weinstein, 2017. "Aggregating from Micro to Macro Patterns of Trade," CEP Discussion Papers dp1513, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp1513
    as

    Download full text from publisher

    File URL: http://cep.lse.ac.uk/pubs/download/dp1513.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Di Comite, Francesco & Thisse, Jacques-François & Vandenbussche, Hylke, 2014. "Verti-zontal differentiation in export markets," Journal of International Economics, Elsevier, vol. 93(1), pages 50-66.
    2. Bas, Maria & Mayer, Thierry & Thoenig, Mathias, 2017. "From micro to macro: Demand, supply, and heterogeneity in the trade elasticity," Journal of International Economics, Elsevier, vol. 108(C), pages 1-19.
    3. Hanson, Gordon H. & Lind, Nelson & Muendler, Marc-Andreas, 2015. "The Dynamics of Comparative Advantage," CAGE Online Working Paper Series 252, Competitive Advantage in the Global Economy (CAGE).
    4. Levchenko, Andrei A. & Zhang, Jing, 2016. "The evolution of comparative advantage: Measurement and welfare implications," Journal of Monetary Economics, Elsevier, vol. 78(C), pages 96-111.
    5. repec:bla:reviec:v:26:y:2018:i:1:p:117-139 is not listed on IDEAS
    6. Fariha Kamal & Ryan Monarch, 2018. "Identifying foreign suppliers in U.S. import data," Review of International Economics, Wiley Blackwell, vol. 26(1), pages 117-139, February.
    7. David Atkin & Benjamin Faber & Marco Gonzalez-Navarro, 2018. "Retail Globalization and Household Welfare: Evidence from Mexico," Journal of Political Economy, University of Chicago Press, vol. 126(1), pages 1-73.
    8. Redding, Stephen J. & Weinstein, David E., 2016. "A unified approach to estimating demand and welfare," LSE Research Online Documents on Economics 67681, London School of Economics and Political Science, LSE Library.
    9. Colin J. Hottman & Stephen J. Redding & David E. Weinstein, 2016. "Quantifying the Sources of Firm Heterogeneity," The Quarterly Journal of Economics, Oxford University Press, vol. 131(3), pages 1291-1364.
    10. Chang-Tai Hsieh & Nicholas Li & Ralph Ossa & Mu-Jeung Yang, 2016. "Accounting for the New Gains from Trade Liberalization," NBER Working Papers 22069, National Bureau of Economic Research, Inc.
    11. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    12. Costas Arkolakis & Arnaud Costinot & Andres Rodriguez-Clare, 2012. "New Trade Models, Same Old Gains?," American Economic Review, American Economic Association, vol. 102(1), pages 94-130, February.
    13. Stephen J. Redding & David E. Weinstein, 2016. "Measuring Aggregate Price Indexes with Taste Shocks: Theory and Evidence for CES Preferences," NBER Working Papers 22479, National Bureau of Economic Research, Inc.
    14. Bas, Maria & Mayer, Thierry & Thoenig, Mathias, 2017. "From micro to macro: Demand, supply, and heterogeneity in the trade elasticity," Journal of International Economics, Elsevier, vol. 108(C), pages 1-19.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Guillaume Gaulier & Aude Sztulman & Deniz Ünal, 2019. "Are global value chains receding? The jury is still out. Key findings from the analysis of deflated world trade in parts and components," Working Papers DT/2019/03, DIAL (Développement, Institutions et Mondialisation).
    2. Nelson Lind & Natalia Ramondo, 2018. "Trade with Correlation," NBER Working Papers 24380, National Bureau of Economic Research, Inc.
    3. Clemens C. Struck, 2017. "On the Interaction of Growth, Trade and International Macroeconomics," Working Papers 201724, School of Economics, University College Dublin.
    4. Nelson Lind & Natalia Ramondo, 2018. "Trade with Correlation," 2018 Meeting Papers 627, Society for Economic Dynamics.

    More about this item

    Keywords

    comparative advantage; trade; prices; quality; variety;

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cep:cepdps:dp1513. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.