Exporter Heterogeneity and Price Discrimination: A Quantitative View

52 Pages Posted: 27 Jul 2015 Last revised: 1 Jul 2022

See all articles by Jae Wook Jung

Jae Wook Jung

Sogang University

Ina Simonovska

University of California - Davis; National Bureau of Economic Research (NBER)

Ariel Weinberger

George Washington University - Department of International Business

Date Written: July 2015

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 nonhomothetic 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.

Suggested Citation

Jung, Jae Wook and Simonovska, Ina and Weinberger, Ariel, Exporter Heterogeneity and Price Discrimination: A Quantitative View (July 2015). NBER Working Paper No. w21408, Available at SSRN: https://ssrn.com/abstract=2636167

Jae Wook Jung (Contact Author)

Sogang University ( email )

35 Baekbeom-ro
Mapo-gu
Seoul, Seoul 04107
Korea, Republic of (South Korea)

Ina Simonovska

University of California - Davis ( email )

1 Shields Ave
Davis, CA 95616
United States

HOME PAGE: http://inasimonovska.weebly.com/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ariel Weinberger

George Washington University - Department of International Business ( email )

2023 G Street NW
Washington, DC 20052
United States

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