The Gains from Input Trade in Firm-Based Models of Importing

56 Pages Posted: 31 Aug 2015 Last revised: 5 Apr 2023

See all articles by Joaquin Blaum

Joaquin Blaum

Brown University

Claire Lelarge

University of Paris-Saclay; 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

Date Written: August 2015

Abstract

Trade in intermediate inputs allows firms to lower their costs of production by using better, cheaper, or novel inputs from abroad. Quantifying the aggregate impact of input trade, however, is challenging. As importing firms differ markedly in how much they buy in foreign markets, results based on aggregate models do not apply. We develop a methodology to quantify the gains from input trade for a class of firm-based models of importing. We derive a sufficiency result: the change in consumer prices induced by input trade is fully determined from the joint distribution of value added and domestic expenditure shares in material spending across firms. We provide a simple formula that can be readily evaluated given the micro-data. In an application to French data, we find that consumer prices of manufacturing products would be 27% higher in the absence of input trade.

Suggested Citation

Blaum, Joaquin and Lelarge, Claire and Lelarge, Claire and Peters, Michael, The Gains from Input Trade in Firm-Based Models of Importing (August 2015). NBER Working Paper No. w21504, Available at SSRN: https://ssrn.com/abstract=2653515

Joaquin Blaum (Contact Author)

Brown University ( email )

Box 1860
Providence, RI 02912
United States

Claire Lelarge

University of Paris-Saclay ( email )

55 Avenue de Paris
Versailles, 78000
France

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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