Abstract:

This paper develops a multi-country model of international trade that provides a simple micro-foundation 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.

'Two-Sided Heterogeneity and Trade', Andrew B Bernard, Andreas Moxnes and Karen Helene Ulltveit-Moe, Review of Economics and Statistics, Volume 100, Issue 3, July 2018