Frictions and adjustments in firm-to-firm trade

Francois Fontaine, Julien Martin and Méjean, Isabelle
Authors registered in the RePEc Author Service: Isabelle Mejean

No 18110, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We develop a quantitative model of firm-to-firm trade in which search frictions, and comparative advantage jointly determine the structure of trade networks. Under Bertrand competition, the model produces heterogeneous prices and markups both across and within trade relationships over time. We estimate the model's parameters using a structural approach that leverages importer mobility across potential input suppliers for identification. We then use the model to study how shocks to suppliers propagate through the supply chain. Search frictions result in highly heterogeneous cost incidence, driven by within-relationship price adjustments and the reconfiguration of supply networks.

Keywords: Firm-to-firm trade; Search frictions; Pass-through (search for similar items in EconPapers)
JEL-codes: F10 F11 F14 (search for similar items in EconPapers)
Date: 2023-04
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Working Paper: Frictions and Adjustments in Firm-to-Firm Trade (2023)
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