The elasticity of substitution between goods from different countries---the Armington elasticity---is important for many questions in international economics, but its magnitude is subject to debate: the "macro" elasticity between home and import goods is often found to be smaller than the "micro" elasticity between foreign sources of imports. We investigate these two elasticities in a model using a nested CES preference structure. We explore estimation techniques for the macro and micro elasticities using both simulated data from a Melitz-style model, and highly disaggregate U.S. production data matched to Harmonized System trade data. We find that in up to one-half of goods there is no significant difference between the macro and micro elasticities, but in the other half of goods the macro elasticity is significantly lower than the micro elasticity, even when they are estimated at the same level of disaggregation.

The elasticity of substitution between goods from different countries---the Armington elasticity---is important for many questions in international economics, but its magnitude is subject to debate: the "macro" elasticity between home and import goods is often found to be smaller than the "micro" elasticity between foreign sources of imports. We investigate these two elasticities in a model using a nested CES preference structure. We explore estimation techniques for the macro and micro elasticities using both simulated data from a Melitz-style model, and highly disaggregate U.S. production data matched to Harmonized System trade data. We find that in up to one-half of goods there is no significant difference between the macro and micro elasticities, but in the other half of goods the macro elasticity is significantly lower than the micro elasticity, even when they are estimated at the same level of disaggregation.

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This paper investigates how firms organize supply chains within and across countries. Utilizing highly disaggregate customs trade statistics for Chinese processing exports, I develop a novel strategy for measuring the position of cities on the value chain. By linking variation in value chain position over time and across cities, to changes in the share of exports that are foreign owned, I assess the role of sequential production in determining optimal vertical integration and firm scope along the global supply chain. I provide evidence that the supply chain position of intermediates and the degree of substitutability across sequential stages of production provide incentives for firms to own intermediate good suppliers, consistent with the theoretical predictions of Antràs and Chor (2013). Additionally, I find evidence that the value added to gross output ratio depends critically on supply chain position-value added increases as firms move down the supply chain, toward final production-which is consistent with Fally and Hillberry (2015).