Distribution capital and the short- and long-run import demand elasticity

Mario Crucini (mcrucini@purdue.edu) and Jonathan Davis

No 137, Globalization Institute Working Papers from Federal Reserve Bank of Dallas

Abstract: International business-cycle models assume that home and foreign goods are poor substitutes. International trade models assume they are close substitutes. This paper constructs a model where this discrepancy is due to frictions in distribution. Imports need to be combined with a local non-traded input, distribution capital, which is slow to adjust. As a result, imported and domestic goods appear as poor substitutes in the short run. In the long run this non-traded input can be reallocated, and quantities can shift following a change in relative prices. Thus the observed substitutability between home and foreign goods gets larger as time passes.

JEL-codes: F1 F4 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2013
New Economics Papers: this item is included in nep-dge and nep-opm
Note: Published as: Crucini, Mario J. and J. Scott Davis (2016), "Distribution Capital and the Short- and Long-Run Import Demand Elasticity," Journal of International Economics 100: 203-219.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Distribution capital and the short- and long-run import demand elasticity (2016)
Working Paper: Distribution Capital and the Short- and Long-run Import Demand Elasticity (2013)
Working Paper: Distribution Capital and the Short- and Long-Run Import Demand Elasticity (2013)
Working Paper: Distribution capital and the short- and long-run import demand elasticity (2013)
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