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"It's Not You, It's Me" : Breakups in U.S.-China Trade Relationships

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  • Ryan Monarch

Abstract

Costs to switching suppliers can affect prices by discouraging buyer movements from high to low cost sellers. This paper uses confidential U.S. Customs data on U.S. importers and their Chinese exporters to investigate these costs. I find considerable barriers to supply chain adjustments: 45% of arm’s-length importers keep their partner, and one-third of switching importers remain in the same city. Guided by these regularities, I propose and structurally estimate a dynamic discrete exporter choice model. Cost estimates are large and heterogeneous across products. These costs matter for trade prices: halving switching costs reduces the U.S.- China Import Price Index by 14.7%.

Suggested Citation

  • Ryan Monarch, 2016. ""It's Not You, It's Me" : Breakups in U.S.-China Trade Relationships," International Finance Discussion Papers 1165, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgif:1165
    DOI: 10.17016/IFDP.2016.1165
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Fariha Kamal & C.J. Krizan & Ryan Monarch, 2015. "Identifying Foreign Suppliers in U.S. Merchandise Import Transactions," Working Papers 15-11, Center for Economic Studies, U.S. Census Bureau.
    2. Tim Schmidt-Eisenlohr & Ryan Monarch, 2015. "Learning and the Value of Relationships in International Trade," 2015 Meeting Papers 668, Society for Economic Dynamics.
    3. Fariha Kamal & C.J. Krizan & Ryan Monarch, 2015. "Identifying Foreign Suppliers in U.S. Merchandise Import Transactions," Working Papers 15-11, Center for Economic Studies, U.S. Census Bureau.
    4. Defever, Fabrice & Fischer, Christian & Suedekum, Jens, 2016. "Relational contracts and supplier turnover in the global economy," Journal of International Economics, Elsevier, vol. 103(C), pages 147-165.
    5. Jerónimo Carballo & Gianmarco I. P. Ottaviano & Christian Volpe Martincus, 2013. "The Buyer Margins of Firms' Exports," CEP Discussion Papers dp1234, Centre for Economic Performance, LSE.
    6. Pol Antràs & Teresa C. Fort & Felix Tintelnot, 2014. "The Margins of Global Sourcing: Theory and Evidence from U.S. Firms," NBER Working Papers 20772, National Bureau of Economic Research, Inc.
    7. Kamal, Fariha & Sundaram, Asha, 2016. "Buyer–seller relationships in international trade: Do your neighbors matter?," Journal of International Economics, Elsevier, vol. 102(C), pages 128-140.
    8. Colin J. Hottman & Ryan Monarch, 2018. "Estimating Unequal Gains across U.S. Consumers with Supplier Trade Data," Working Papers 18-04, Center for Economic Studies, U.S. Census Bureau.
    9. Fabrice Defever & Christian Fischer & Jens Suedekum, 2017. "Supplier Search and Rematching in Global Sourcing - Theory and Evidence from China," CESifo Working Paper Series 6748, CESifo Group Munich.
    10. repec:aea:aecrev:v:107:y:2017:i:9:p:2514-64 is not listed on IDEAS

    More about this item

    Keywords

    International Trade ; Import Price ; Transactional Relationships;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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