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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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    File URL: http://www.federalreserve.gov/econresdata/ifdp/2016/files/ifdp1165.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. 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.
    2. repec:eee:inecon:v:112:y:2018:i:c:p:33-49 is not listed on IDEAS
    3. Pol Antràs & Teresa C. Fort & Felix Tintelnot, 2017. "The Margins of Global Sourcing: Theory and Evidence from US Firms," American Economic Review, American Economic Association, vol. 107(9), pages 2514-2564, September.
    4. Andrew B. Bernard & Andreas Moxnes, 2018. "Networks and Trade," CEP Discussion Papers dp1541, Centre for Economic Performance, LSE.
    5. 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.
    6. Tim Schmidt-Eisenlohr & Ryan Monarch, 2015. "Learning and the Value of Relationships in International Trade," 2015 Meeting Papers 668, Society for Economic Dynamics.
    7. Shibi He & Volodymyr Lugovskyy, 2018. "Domestic Spillovers and Foreign Networks in Exporting," Caepr Working Papers 2018-005 Classification-F, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
    8. Carballo, Jeronimo & Ottaviano, Gianmarco I.P. & Volpe Martincus, Christian, 2018. "The buyer margins of firms' exports," Journal of International Economics, Elsevier, vol. 112(C), pages 33-49.
    9. 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.
    10. 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.
    11. Defever, Fabrice & Fischer, Christian & Suedekum, Jens, 2017. "Supplier search and re-matching in global sourcing: Theory and evidence from China," DICE Discussion Papers 273, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    12. Aaron Flaaen, 2017. "The Role of Transfer Prices in Profit-Shifting by U.S. Multinational Firms : Evidence from the 2004 Homeland Investment Act," Finance and Economics Discussion Series 2017-055, Board of Governors of the Federal Reserve System (US).

    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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