Estimating Unequal Gains Across U.S. Consumers with Supplier Trade Data

53 Pages Posted: 19 Jan 2018

See all articles by Colin Hottman

Colin Hottman

Board of Governors of the Federal Reserve System

Ryan Monarch

Federal Reserve Board

Date Written: 2018-01-17

Abstract

Using supplier-level trade data, we estimate the effect on consumer welfare from changes in U.S. imports both in the aggregate and for different household income groups from 1998 to 2014. To do this, we use consumer preferences which feature non-homotheticity both within sectors and across sectors. After structurally estimating the parameters of the model, using the universe of U.S. goods imports, we construct import price indexes in which a variety is defined as a foreign establishment producing an HS10 product that is exported to the United States. We find that lower income households experienced the most import price inflation, while higher income households experienced the least import price inflation during our time period. Thus, we do not find evidence that the consumption channel has mitigated the distributional effects of trade that have occurred through the nominal income channel in the United States over the past two decades.

Keywords: Import price index, Non-homotheticity, Real income inequality, Product variety, Markups

JEL Classification: D12, E31, F14

Suggested Citation

Hottman, Colin and Monarch, Ryan, Estimating Unequal Gains Across U.S. Consumers with Supplier Trade Data (2018-01-17). FRB International Finance Discussion Paper No. 1220. Available at SSRN: https://ssrn.com/abstract=3105282 or http://dx.doi.org/10.17016/IFDP.2018.1220

Colin Hottman (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

HOME PAGE: http://www.federalreserve.gov/econresdata/colin-j-hottman.htm

Ryan Monarch

Federal Reserve Board ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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