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The Gains from Input Trade with Heterogeneous Importers

Author

Listed:
  • Blaum, Joaquin
  • Lelarge, Claire
  • Peters, Michael

Abstract

Trade in intermediate inputs allows firms to reduce their costs of production and thus benefits consumers through lower prices of domestically produced goods. The extent to which firms participate in foreign input markets, however, varies substantially. We develop a methodology to measure how consumer prices are affected by input trade in environments that allow for such heterogeneity in import behavior. 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 are sufficient to compute changes in consumer prices. Approaches that abstract from firm level heterogeneity and rely on aggregate statistics give biased results. In an application to French data, we find that prices of manufacturing products would be 27% higher in the absence of input trade.

Suggested Citation

  • Blaum, Joaquin & Lelarge, Claire & Peters, Michael, 2016. "The Gains from Input Trade with Heterogeneous Importers," CEPR Discussion Papers 11721, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:11721
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    Citations

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    Cited by:

    1. J. Blaum & c. Lelarge & M. Peters, 2017. "Firm Size and the Intensive Margin of Import Demand," Working papers 657, Banque de France.
    2. Magne Mogstad & Emmanuel Dhyne & Ayumu Kikkawa & Felix Tintelnot, 2017. "Trade and Domestic Production Networks," 2017 Meeting Papers 381, Society for Economic Dynamics.
    3. Clément Magouyres & Thierry Mayer & Clément Mazet, 2019. "Technology-Induced Trade Shocks? Evidence from Broadband Expansion in France," Sciences Po publications 2019-10, Sciences Po.
    4. repec:anr:reveco:v:10:y:2018:p:207-236 is not listed on IDEAS
    5. Thibault Fally & James Sayre, 2018. "Commodity Trade Matters," 2018 Meeting Papers 172, Society for Economic Dynamics.
    6. Paola Conconi & Manuel García-Santana & Laura Puccio & Roberto Venturini, 2018. "From Final Goods to Inputs: The Protectionist Effect of Rules of Origin," American Economic Review, American Economic Association, vol. 108(8), pages 2335-2365, August.
    7. Robert C. Feenstra, 2017. "Statistics to Measure Offshoring and its Impact," NBER Working Papers 23067, National Bureau of Economic Research, Inc.
    8. Bosker, Maarten & Westbrock, Bastian, 2018. "The network origins of the gains from trade," CEPR Discussion Papers 13285, C.E.P.R. Discussion Papers.
    9. Taiji Furusawa & Tomohiko Inui & Keiko Ito & Heiwai Tang, 2017. "Global Sourcing and Domestic Production Networks," CESifo Working Paper Series 6658, CESifo Group Munich.
    10. Joaquin Blaum & Claire Lelarge & Michael Peters, 2019. "Firm Size, Quality Bias and Import Demand," 2019 Meeting Papers 1067, Society for Economic Dynamics.
    11. repec:bfr:rueban:2018:70 is not listed on IDEAS
    12. repec:eee:inecon:v:118:y:2019:i:c:p:138-159 is not listed on IDEAS
    13. Ildikó Magyari, 2017. "Firm Reorganization, Chinese Imports, and US Manufacturing Employment," Working Papers 17-58, Center for Economic Studies, U.S. Census Bureau.
    14. Li, Yifan & Miao, Zhuang, 2018. "Trade costs, import penetration, and markups," MPRA Paper 85668, University Library of Munich, Germany.
    15. Robert C. Johnson, 2018. "Measuring Global Value Chains," Annual Review of Economics, Annual Reviews, vol. 10(1), pages 207-236, August.
    16. Carluccio, Juan & Cuñat, Alejandro & Fadinger, Harald & Fons-Rosen, Christian, 2019. "Offshoring and skill-upgrading in French manufacturing," Journal of International Economics, Elsevier, vol. 118(C), pages 138-159.

    More about this item

    Keywords

    Gains from trade; Imports; productivity; Sufficient statistic approach;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • 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
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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