From Micro to Macro: Demand, Supply, and Heterogeneity in the Trade Elasticity

Maria Bas (), Thierry Mayer and Mathias Thoenig
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Maria Bas: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

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Abstract: Models of heterogeneous firms with selection into export market participation generically exhibit aggregate trade elasticities that vary across country-pairs. Only when heterogeneity is assumed Pareto-distributed do all elasticities collapse into a unique elasticity, estimable with a gravity equation. This paper provides a theory-consistent methodology for quantifying country-pair specific aggregate elasticities when moving away from Pareto, i.e. when gravity does not hold. Combining two firm-level customs datasets for which we observe French and Chinese individual sales on the same destination market over the 2000–2006 period, we are able to estimate all the components of the bilateral aggregate elasticity: i) the demand-side parameter that governs the intensive margin and ii) the supply side parameters that drive the extensive margin. These components are then used to calculate theoretical predictions of bilateral aggregate elasticities over the whole set of destinations, and how those elasticities decompose into different margins. Our predictions fit well with econometric estimates, supporting our view that micro-data is a key element in the quantification of aggregate trade elasticities.

Keywords: Trade elasticity; Firm-level data; Heterogeneity; Gravity; Pareto; Log-normal (search for similar items in EconPapers)
Date: 2017-09
Note: View the original document on HAL open archive server: https://hal.science/hal-02483306
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Citations: View citations in EconPapers (5)

Published in Journal of International Economics, 2017, 108, pp.1-19. ⟨10.1016/j.jinteco.2017.05.001⟩

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Related works:
Journal Article: From micro to macro: Demand, supply, and heterogeneity in the trade elasticity (2017)
Working Paper: From Micro to Macro: Demand, Supply, and Heterogeneity in the Trade Elasticity (2017)
Working Paper: From Micro to Macro: Demand, Supply, and Heterogeneity in the Trade Elasticity (2017)
Working Paper: From Micro to Macro: Demand, Supply, and Heterogeneity in the Trade Elasticity (2015)
Working Paper: From Micro to Macro: Demand, Supply, and Heterogeneity in the Trade Elasticity (2015)
Working Paper: From Micro to Macro: Demand, Supply, and Heterogeneity in the Trade Elasticity (2015)
Working Paper: From Micro to Macro: Demand, Supply, and Heterogeneity in the Trade Elasticity (2015)
Working Paper: From Micro to Macro: Demand, Supply, and Heterogeneity in the Trade Elasticity (2015)
Working Paper: From Micro to Macro: Demand, Supply, and Heterogeneity in the Trade Elasticity (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:hal-02483306

DOI: 10.1016/j.jinteco.2017.05.001

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