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What are the Price Effects of Trade? Evidence from the U.S. and Implications for Quantitative Trade Models

Xavier Jaravel () and Erick Sager

No 2019-068, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper finds that U.S. consumer prices fell substantially due to increased trade with China. With comprehensive price micro-data and two complementary identification strategies, we estimate that a 1pp increase in import penetration from China causes a 1.91% decline in consumer prices. This price response is driven by declining markups for domestically-produced goods, and is one order of magnitude larger than in standard trade models that abstract from strategic price-setting. The estimates imply that trade with China increased U.S. consumer surplus by about $400,000 per displaced job, and that product categories catering to low-income consumers experienced larger price declines.

Keywords: China; Inequality; Markups; Prices; Trade (search for similar items in EconPapers)
JEL-codes: F10 F13 F14 (search for similar items in EconPapers)
Pages: 110 pages
Date: 2019-09-20
New Economics Papers: this item is included in nep-cna and nep-int
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https://www.federalreserve.gov/econres/feds/files/2019068pap.pdf (application/pdf)

Related works:
Working Paper: What are the Price Effects of Trade? Evidence from the US and Implications for Quantitative Trade Models (2019) Downloads
Working Paper: What are the Price Effects of Trade? Evidence from the U.S. and Implications for Quantitative Trade Models (2019) Downloads
Working Paper: What are the Price Effects of Trade? Evidence from the U.S. and Implications for Quantitative Trade Models (2019) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2019-68

DOI: 10.17016/FEDS.2019.068

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