The Gains from Input Trade with Heterogeneous Importers

Claire Lelarge, Joaquin Blaum and Michael Peters

No 11721, CEPR Discussion Papers from Centre for Economic Policy Research

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.

Keywords: Productivity; Imports; Gains from trade; Sufficient statistic approach (search for similar items in EconPapers)
JEL-codes: D21 D22 F11 F12 F14 F62 (search for similar items in EconPapers)
Date: 2016-12
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (27)

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Related works:
Journal Article: The Gains from Input Trade with Heterogeneous Importers (2018)
Working Paper: The Gains from Input Trade with Heterogeneous Importers (2016)
Working Paper: The Gains from Input Trade in Firm-Based Models of Importing (2016)
Working Paper: The Gains from Input Trade in Firm-Based Models of Importing (2015)
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