The unit values of internationally traded goods are heavily influenced by quality. We model this in an extended monopolistic competition framework where, in addition to choosing price, firms ...simultaneously choose quality subject to nonhomothetic demand. We estimate quality and quality-adjusted price indexes for 185 countries over 1984–2011. Our estimates are less sensitive to assumptions about the extensive margin of firms than are purely ‘‘demand-side’’ estimates. We find that quality-adjusted prices vary much less across countries than do unit values and, surprisingly, the quality-adjusted terms of trade are negatively related to countries’ level of income.
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The Next Generation of the Penn World Table Feenstra, Robert C.; Inklaar, Robert; Timmer, Marcel P.
The American economic review,
10/2015, Volume:
105, Issue:
10
Journal Article
Peer reviewed
Open access
We describe the theory and practice of real GDP comparisons across countries and over time. Version 8 of the Penn World Table expands on previous versions in three respects. First, in addition to ...comparisons of living standards using components of real GDP on the expenditure side, we provide a measure of productive capacity, called real GDP on the output side. Second, growth rates are benchmarked to multiple years of cross-country price data so they are less sensitive to new benchmark data. Third, data on capital stocks and productivity are (re)introduced. Applications including the Balassa-Samuelson effect and development accounting are discussed.
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BFBNIB, CEKLJ, INZLJ, IZUM, KILJ, NMLJ, NUK, ODKLJ, PILJ, PNG, SAZU, UL, UM, UPUK, ZRSKP
This paper examines why credit constraints for domestic and exporting firms arise in a setting where banks do not observe firms' productivities. To maintain incentive compatibility, banks lend below ...the amount that firms need for optimal production. The longer time needed for export shipments induces a tighter credit constraint on exporters than on purely domestic firms. In our application to Chinese firms, we find that the credit constraint is more stringent as a firm's export share grows, as the time to ship for exports is lengthened, and as there is greater dispersion of firms' productivities, reflecting more incomplete information.
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4.
US exports and employment Feenstra, Robert C.; Ma, Hong; Xu, Yuan
Journal of international economics,
09/2019, Volume:
120
Journal Article
Peer reviewed
Open access
We study the employment responses to the expansion of US exports and to the import competition, especially from China. We find that although import competition reduces jobs, export expansion also ...creates a substantial number of jobs. At the industry level, job gains due to US export expansion largely offset job losses due to Chinese import competition, resulting in a net gain of 379 thousand jobs over 1991–2011 in our preferred estimate. At the commuting zone level, job gains and losses are roughly balanced, with a slight net loss of 68 thousand jobs and a substantial range around this preferred estimate depending on the specification.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UILJ, UL, UM, UPCLJ, UPUK, ZAGLJ, ZRSKP
The monopolistic competition model in international trade offers three sources of gains from trade beyond that of traditional comparative advantage: an endogenous expansion in product variety; a ...pro-competitive reduction in the markups charged by firms; and the self-selection of more efficient firms into exporting. Recent literature on trade with heterogeneous firms has emphasized the third of these effects, while the first two effects are ruled out when using a Pareto distribution for productivity with a support that is unbounded above, and no fixed costs. The goal of this paper is to restore a theoretical role for product variety and pro-competitive gains from trade by using a bounded Pareto distribution for productivity, and to demonstrate their empirical importance. For the U.S. economy over 1992–2005, we find that product variety and the reduction in markups jointly contribute about 75% to the increase in welfare resulting from trade expansion, whereas an upper bound to the selection effect is that it contributes the remaining 25% to the increase in U.S. welfare.
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The modern theory of international trade identifies several additional sources of the gains from international trade beyond the gains from traditional comparative advantage. These are the gains from ...importing new product varieties; the gains from “creative destruction” as the relatively most productive firms expand their output by exporting while the less-productive firms exit; and the gains from competition between firms in different countries, which can lead to reduced markups. Estimates of these various gains are provided for the United States and other countries.
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CEKLJ, IZUM, KILJ, NUK, ODKLJ, PILJ, SAZU, UL, UM, UPUK
This paper quantifies the impact on U.S. employment from imports and exports during 1995–2011, using the World Input–Output Database. We find that the growth in U.S. exports led to increased demand ...for 2 million jobs in manufacturing, 0.5 million in resource industries, and a remarkable 4.1 million jobs in services, totaling 6.6 million. Two‐thirds of those service sectors jobs are due to the export of services themselves, whereas one‐third is due to the intermediate demand from manufacturing and resource—or merchandise—exports, so the total labor demand gain due to merchandise exports was 3.7 million jobs. In comparison, U.S. merchandise imports from China led to reduced demand of 1.4 million jobs in manufacturing and 0.6 million in services (with small losses in resource industries), with total job losses of 2.0 million. It follows that the expansion in U.S. merchandise exports relative to imports from China over 1995–2011 created net demand for about 1.7 million jobs. Comparing the growth of U.S. merchandise exports to merchandise imports from all countries, we find a fall in net labor demand due to trade, but comparing the growth of total U.S. exports to total imports from all countries, then there is a rise in net labor demand because of the growth in service exports.
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FZAB, GIS, IJS, IZUM, KILJ, NLZOH, NUK, OILJ, PILJ, SAZU, SBCE, SBMB, UL, UM, UPUK
Globalization, Markups, and US Welfare Feenstra, Robert C.; Weinstein, David E.
The Journal of political economy,
08/2017, Volume:
125, Issue:
4
Journal Article
Peer reviewed
This paper estimates the impact of globalization on markups, and the effect of changing markups on US welfare, in a monopolistic competition model. We work with symmetric translog preferences, which ...allow for endogenous markups and firm entry and exit, thereby changing product variety. We find that between 1992 and 2005, US import shares rose and US firms exited, leading to an implied fall in markups, while variety went up because of imports. US welfare rose by nearly 1 percent as a result of these changes, with product variety contributing onehalf of that total and declining markups the other half.
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9.
IN SEARCH OF THE ARMINGTON ELASTICITY Feenstra, Robert C.; Luck, Philip; Obstfeld, Maurice ...
The review of economics and statistics,
03/2018, Volume:
100, Issue:
1
Journal Article
Peer reviewed
Open access
How big is the elasticity of substitution between goods from different countries—the Armington elasticity? Estimates of the macroelasticity between home and imported goods are often smaller than the ...microelasticity between foreign sources of imports. Using new, highly disaggregate U.S. production data matched to imports and simulated data from a Melitz-style model with nested CES preferences, we explore estimation techniques for the two elasticities. For between two-thirds and three-quarters of sample goods, there is no significant difference between the macro- and microelasticities, but for the rest, the microelasticity is significantly higher, even at the same level of disaggregation.
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Abstract
We examine the price and variety of a sample of consumer goods at the barcode level in cities within China. Unlike the position in the United States, in China the prices of goods tend to be ...lower in larger cities. We explain that difference between the countries by the more uneven spatial distribution of manufacturers’ sales and retailers in China, and we confirm the pro-competitive effect of city size on reducing markups there. In both countries, there is a greater variety of goods in larger cities, but that effect is more pronounced in China. Combining the lower prices and greater variety, the price indexes in China for the goods we study fall with city size by around seven times more than in the United States.
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