The Gains from Input Trade with Heterogeneous Importers

81 Pages Posted: 3 Jan 2017

See all articles by Joaquin Blaum

Joaquin Blaum

Brown University

Claire Lelarge

Banque de France - Economic Study and Research Division; Centre for Economic Policy Research (CEPR)

Michael Peters

Yale University - Department of Economics; Yale University - Cowles Foundation

Multiple version iconThere are 2 versions of this paper

Date Written: December 2016

Abstract

Trade in intermediate inputs allows firms to reduce their costs of production and thus benefits consumers through lower prices of domestically produced goods. The extent to which firms participate in foreign input markets, however, varies substantially. We develop a methodology to measure how consumer prices are affected by input trade in environments that allow for such heterogeneity in import behavior. We provide a theoretical result that holds in a variety of settings: the firm-level data on value added and domestic expenditure shares in material spending are sufficient to compute changes in consumer prices. Approaches that abstract from firm level heterogeneity and rely on aggregate statistics give biased results. In an application to French data, we find that prices of manufacturing products would be 27% higher in the absence of input trade.

Keywords: Gains from trade, Imports, productivity, Sufficient statistic approach

JEL Classification: D21, D22, F11, F12, F14, F62

Suggested Citation

Blaum, Joaquin and Lelarge, Claire and Peters, Michael, The Gains from Input Trade with Heterogeneous Importers (December 2016). CEPR Discussion Paper No. DP11721, Available at SSRN: https://ssrn.com/abstract=2893074

Joaquin Blaum (Contact Author)

Brown University ( email )

Box 1860
Providence, RI 02912
United States

Claire Lelarge

Banque de France - Economic Study and Research Division ( email )

31, rue Croix des Petits Champs
75049 Paris Cedex 01
FRANCE

HOME PAGE: http://https://sites.google.com/site/clairelelargeeconomics/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Michael Peters

Yale University - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States

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