The Gains from Input Trade in Firm-Based Models of Importing

Joaquin Blaum, Claire Lelarge and Michael Peters

No 21504, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Trade in intermediate inputs allows firms to lower their costs of production by using better, cheaper, or novel inputs from abroad. Quantifying the aggregate impact of input trade, however, is challenging. As importing firms differ markedly in how much they buy in foreign markets, results based on aggregate models do not apply. We develop a methodology to quantify the gains from input trade for a class of firm-based models of importing. We derive a sufficiency result: the change in consumer prices induced by input trade is fully determined from the joint distribution of value added and domestic expenditure shares in material spending across firms. We provide a simple formula that can be readily evaluated given the micro-data. In an application to French data, we find that consumer prices of manufacturing products would be 27% higher in the absence of input trade.

JEL-codes: D21 D22 F11 F12 F14 F62 (search for similar items in EconPapers)
Date: 2015-08
New Economics Papers: this item is included in nep-int
Note: ITI
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Citations: View citations in EconPapers (29)

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Related works:
Working Paper: The Gains from Input Trade with Heterogeneous Importers (2016)
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)
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