Department of Economics
University of Oklahoma
308 Cate Center Drive
Norman, OK 73019
NBER Working Papers and Publications
|July 2015||Exporter Heterogeneity and Price Discrimination: A Quantitative View|
with Jae Wook Jung, Ina Simonovska: w21408
We quantify a class of commonly-employed general equilibrium models of international trade and pricing-to-market that feature firm-level heterogeneity and consumers with nonhomothetic preferences. We demonstrate theoretically that the models lack the flexibility to match salient features of US firm-level data. Consequently, we outline a theoretical framework that can reconcile the documented price dispersion across firms and markets, while maintaining consistency with cross-sectional observations on firm productivity and sales. We calibrate the model’s parameters to match bilateral trade flows across 71 countries as well as the productivity and sales advantages of US exporters over non-exporters. We find that the calibrated model accounts for the majority of the dispersion in prices of tra...