Firms differ substantially in their participation in foreign input markets. We develop a methodology to measure the aggregate effects of input trade that takes such heterogeneity into account. 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 is sufficient to compute the change in consumer prices due to a shock to the import environment. We characterize the bias of approaches that rely on aggregate statistics. In an application to French data, input trade reduces the prices of manufacturing products by 27 percent.
Blaum, Joaquin, Claire Lelarge, and Michael Peters.
"The Gains from Input Trade with Heterogeneous Importers."
American Economic Journal: Macroeconomics,
Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
Price Level; Inflation; Deflation
Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
Empirical Studies of Trade
Production, Pricing, and Market Structure; Size Distribution of Firms
Firm Performance: Size, Diversification, and Scope
Industry Studies: Manufacturing: General