What are the price effects of trade? Evidence from the US for quantitative trade models

Jaravel, Xavier ORCID: 0000-0001-9228-2137 and Sager, Erick (2019) What are the price effects of trade? Evidence from the US for quantitative trade models. CEP Discussion Papers. Centre for Economic Performance, LSE, London, UK.

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Abstract

This paper finds that U.S. consumer prices fell substantially due to increased trade with China. With comprehensive price micro-data and two complementary identification strategies, we estimate that a 1pp increase in import penetration from China causes a 1.91% decline in consumer prices. This price response is driven by declining markups for domestically-produced goods, and is one order of magnitude larger than in standard trade models that abstract from strategic price-setting. The estimates imply that trade with China increased U.S. consumer surplus by about $400,000 per displaced job, and that product categories catering to low-income consumers experienced larger price declines.

Item Type:	Monograph (Discussion Paper)
Official URL:	http://cep.lse.ac.uk/_new/publications/series.asp?...
Additional Information:	© 2019 The Authors
Divisions:	Economics
Subjects:	H Social Sciences > HF Commerce H Social Sciences > HC Economic History and Conditions
JEL classification:	F - International Economics > F1 - Trade > F10 - General F - International Economics > F1 - Trade > F13 - Commercial Policy; Protection; Promotion; Trade Negotiations; International Trade Organizations F - International Economics > F1 - Trade > F14 - Country and Industry Studies of Trade
Date Deposited:	17 Feb 2020 11:15
Last Modified:	11 Dec 2024 19:33
URI:	http://eprints.lse.ac.uk/id/eprint/103402

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