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

Jaravel, Xavier Laurent ORCID: 0000-0001-9228-2137 and Sager, Erick (2019) What are the price effects of trade? Evidence from the US and implications for quantitative trade models. CEP Discussion Papers (CEPDP1642). London School of Economics and Political Science. Centre for Economic Performance, 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:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2019 The Author(s)
Divisions:	Economics
Subjects:	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:	06 Mar 2024 14:45
Last Modified:	11 Dec 2024 19:53
URI:	http://eprints.lse.ac.uk/id/eprint/121819

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