Two-sided heterogeneity and trade
This paper develops a multicountry model of international trade that provides a simple microfoundation for buyer-seller relationships in trade. We explore a rich data set that identifies buyers and sellers in trade and establish a set of basic facts that guide the development of the theoretical model. We use predictions of the model to examine the role of buyer heterogeneity in a market for firm-level adjustments to trade shocks, as well as to quantitatively evaluate how firms' marginal costs depend on access to suppliers in foreign markets.
1 July 2018
Review of Economics and Statistics 100(3) , pp.424-439, 2018
This Journal article is published under the centre's Trade programme.