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CEP discussion paper

Two-sided heterogeneity and Trade

This paper develops a multi-country model of international trade that provides a simple micro-foundation for buyer-seller relationships in trade. We explore a rich dataset 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.

Andrew B. Bernard, Andreas Moxnes and Karen Helene Ulltveit-Moe

26 April 2016     Paper Number CEPDP1426

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This CEP discussion paper is published under the centre's Trade programme.