Bernard, Andrew B., Moxnes, Andreas and Ulltveit-Moe, Karen Helene
(2016)
Two-sided heterogeneity and trade.
CEP Discussion Paper (1426).
London School of Economics and Political Science. Centre for Economic Performance, London, UK.
Abstract
This paper develops a multi-country model of international trade that provides a simple microfoundation 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.
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