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Exporter Heterogeneity and Price Discrimination: A Quantitative View

Ina Simonovska (), Ariel Weinberger () and Jae Wook Jung

No 44, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: We quantify a class of commonly-employed general equilibrium models of international trade and pricing-to-market that feature firm-level heterogeneity and consumers with non-homothetic preferences. We demonstrate theoretically that the models lack the flexibility to match salient features of US firm-level data. Consequently, we outline a theoretical framework that can reconcile the documented price dispersion across firms and markets, while maintaining consistency with cross-sectional observations on firm productivity and sales. We calibrate the model's parameters to match bilateral trade flows across 71 countries as well as the productivity and sales advantages of US exporters over non-exporters. We find that the calibrated model accounts for the majority of the dispersion in prices of tradables across countries of different income levels, while maintaining a tight quantitative fit to firm-level data. Given its additional flexibility, the model quantitatively outperforms the existing alternatives and yields welfare gains for the US that are 14-54% higher, but at the cost of loss of tractability.

Date: 2017
New Economics Papers: this item is included in nep-bec and nep-int
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Journal Article: Exporter heterogeneity and price discrimination: A quantitative view (2019) Downloads
Working Paper: Exporter Heterogeneity and Price Discrimination: A Quantitative View (2015) Downloads
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