This project has received funding from the European Research Council (ERC) under the European Union's Horizon 2020 research and innovation programme (grant agreements No 715147 and No 724880). The views expressed here are those of the authors and do not necessarily reflect those of the National Bank of Belgium. We thank Julian di Giovanni, Isabelle Mejean, Jasmine Xiao, Thomas Åstebro and two anonymous referees at the National Bank of Belgium for helpful comments and valuable discussion. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. At least one co-author has disclosed a financial relationship of potential relevance for this research. Further information is available online at http://www.nber.org/papers/w25441.ack NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
This paper studies the implications of imperfect competition in firm-to-firm trade. Exploiting data on the universe of sales relationships between Belgian firms, we document that firms’ markups increase in the average input shares among their buyers. Motivated by this fact, we develop and estimate a model where firms charge buyer-supplier-specific markups that depend on the bilateral input shares. We find markup dispersion within firms across buyers creates substantial welfare loss: Aggregate welfare increases by around 6% when firms are banned from charging different markups across buyers.
This paper compares various estimation methods often used in the estimation of gravity models of international trade. The authors first discuss different structural and consistent estimation techniques, their underlying assumptions and their impact on estimated coefficients. They then estimate the gravity model for global bilateral trade flows using various empirical methodologies. They focus on a comparison of the distance and border effects across estimation techniques. For the border effects they take into account adjacency effects as well as the distinction between intra-regional and inter-regional trade. Their findings confirm the significantly negative distance and the significantly positive adjacency effect across estimation methods, although the size of the effects varies substantially across methods. The border effects by global regions are much more sensitive -both in size and direction -to the applied estimation method. Although all estimation methods have their own merits and drawbacks, the authors provide some guidelines for future empirical research based on their findings.
The purpose of these working papers is to promote the circulation of research results (Research Series) and analytical studies (Documents Series) made within the National Bank of Belgium or presented by external economists in seminars, conferences and conventions organised by the Bank. The aim is therefore to provide a platform for discussion. The opinions expressed are strictly those of the authors and do not necessarily reflect the views of the National Bank of Belgium.
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