Gains from trade: Demand, supply, and idiosyncratic shocks
Summary Firm‐level sales are often used as a proxy for productivity to quantify welfare gains from trade (GFT) using firm‐level data. This approach ignores the fact that heterogeneity in firm‐level sales is driven by factors other than productivity. Our theoretical and empirical analysis reveals tha...
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| Veröffentlicht in: | Journal of applied econometrics (Chichester, England) England), 2024-08, Vol.39 (5), p.870-886 |
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| container_title | Journal of applied econometrics (Chichester, England) |
| container_volume | 39 |
| creator | Dewitte, Ruben Merlevede, Bruno Rayp, Glenn |
| description | Summary
Firm‐level sales are often used as a proxy for productivity to quantify welfare gains from trade (GFT) using firm‐level data. This approach ignores the fact that heterogeneity in firm‐level sales is driven by factors other than productivity. Our theoretical and empirical analysis reveals that using sales as a proxy conflates persistent productivity with transitory demand and supply shocks, resulting in an over‐dispersed productivity distribution. Assigning this shock‐inflated productivity to a modeled economy's supply‐side results in overestimated GFT. We show how to obtain unbiased productivity estimates, aggregate trade elasticities, and GFT estimates by exploiting the revenue production function from a single‐source country. |
| doi_str_mv | 10.1002/jae.3051 |
| format | Article |
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Firm‐level sales are often used as a proxy for productivity to quantify welfare gains from trade (GFT) using firm‐level data. This approach ignores the fact that heterogeneity in firm‐level sales is driven by factors other than productivity. Our theoretical and empirical analysis reveals that using sales as a proxy conflates persistent productivity with transitory demand and supply shocks, resulting in an over‐dispersed productivity distribution. Assigning this shock‐inflated productivity to a modeled economy's supply‐side results in overestimated GFT. We show how to obtain unbiased productivity estimates, aggregate trade elasticities, and GFT estimates by exploiting the revenue production function from a single‐source country.</description><identifier>ISSN: 0883-7252</identifier><identifier>EISSN: 1099-1255</identifier><identifier>DOI: 10.1002/jae.3051</identifier><language>eng</language><publisher>Chichester: Wiley Periodicals Inc</publisher><subject>Demand analysis ; Econometrics ; Elasticity ; Empirical analysis ; Estimates ; gains from trade ; gravity ; Heterogeneity ; Productivity ; productivity distribution ; Sales ; Supply & demand ; trade elasticity ; transitory shocks ; Welfare</subject><ispartof>Journal of applied econometrics (Chichester, England), 2024-08, Vol.39 (5), p.870-886</ispartof><rights>2024 John Wiley & Sons, Ltd.</rights><lds50>peer_reviewed</lds50><woscitedreferencessubscribed>false</woscitedreferencessubscribed><cites>FETCH-LOGICAL-c3441-7b02cb4db5f5a7313da3afb935232eed753e519637cf6d2630e1afa6672e0bdd3</cites></display><links><openurl>$$Topenurl_article</openurl><openurlfulltext>$$Topenurlfull_article</openurlfulltext><thumbnail>$$Tsyndetics_thumb_exl</thumbnail><linktopdf>$$Uhttps://onlinelibrary.wiley.com/doi/pdf/10.1002%2Fjae.3051$$EPDF$$P50$$Gwiley$$H</linktopdf><linktohtml>$$Uhttps://onlinelibrary.wiley.com/doi/full/10.1002%2Fjae.3051$$EHTML$$P50$$Gwiley$$H</linktohtml><link.rule.ids>314,776,780,1411,27901,27902,45550,45551</link.rule.ids></links><search><creatorcontrib>Dewitte, Ruben</creatorcontrib><creatorcontrib>Merlevede, Bruno</creatorcontrib><creatorcontrib>Rayp, Glenn</creatorcontrib><title>Gains from trade: Demand, supply, and idiosyncratic shocks</title><title>Journal of applied econometrics (Chichester, England)</title><description>Summary
Firm‐level sales are often used as a proxy for productivity to quantify welfare gains from trade (GFT) using firm‐level data. This approach ignores the fact that heterogeneity in firm‐level sales is driven by factors other than productivity. Our theoretical and empirical analysis reveals that using sales as a proxy conflates persistent productivity with transitory demand and supply shocks, resulting in an over‐dispersed productivity distribution. Assigning this shock‐inflated productivity to a modeled economy's supply‐side results in overestimated GFT. We show how to obtain unbiased productivity estimates, aggregate trade elasticities, and GFT estimates by exploiting the revenue production function from a single‐source country.</description><subject>Demand analysis</subject><subject>Econometrics</subject><subject>Elasticity</subject><subject>Empirical analysis</subject><subject>Estimates</subject><subject>gains from trade</subject><subject>gravity</subject><subject>Heterogeneity</subject><subject>Productivity</subject><subject>productivity distribution</subject><subject>Sales</subject><subject>Supply & demand</subject><subject>trade elasticity</subject><subject>transitory shocks</subject><subject>Welfare</subject><issn>0883-7252</issn><issn>1099-1255</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2024</creationdate><recordtype>article</recordtype><recordid>eNp10E9LwzAYx_EgCs4p-BICXjys80nSNOtuY86pDLzoOaT5g51bU5MO6bs3s4InTyHw4fvAD6FrAlMCQO-2yk4ZcHKCRgTKMiOU81M0gtmMZYJyeo4uYtwCQAEgRmi-VnUTsQt-j7ugjJ3je7tXjZngeGjbXT_B6YNrU_vYNzqortY4vnv9ES_RmVO7aK9-3zF6e1i9Lh-zzcv6abnYZJrlOclEBVRXuam440owwoxiylUl45RRa43gzHJSFkxoVxhaMLBEOVUUglqojGFjdDN02-A_DzZ2cusPoUknJYOS5ILNuEjqdlA6-BiDdbIN9V6FXhKQx2VkWkYel0kUD9Rq39TxD5aEpl5OeSLZQL7qne3_Tcnnxeon-Q3Zj20f</recordid><startdate>202408</startdate><enddate>202408</enddate><creator>Dewitte, Ruben</creator><creator>Merlevede, Bruno</creator><creator>Rayp, Glenn</creator><general>Wiley Periodicals Inc</general><scope>OQ6</scope><scope>AAYXX</scope><scope>CITATION</scope><scope>8BJ</scope><scope>FQK</scope><scope>JBE</scope><scope>JQ2</scope></search><sort><creationdate>202408</creationdate><title>Gains from trade: Demand, supply, and idiosyncratic shocks</title><author>Dewitte, Ruben ; Merlevede, Bruno ; Rayp, Glenn</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c3441-7b02cb4db5f5a7313da3afb935232eed753e519637cf6d2630e1afa6672e0bdd3</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2024</creationdate><topic>Demand analysis</topic><topic>Econometrics</topic><topic>Elasticity</topic><topic>Empirical analysis</topic><topic>Estimates</topic><topic>gains from trade</topic><topic>gravity</topic><topic>Heterogeneity</topic><topic>Productivity</topic><topic>productivity distribution</topic><topic>Sales</topic><topic>Supply & demand</topic><topic>trade elasticity</topic><topic>transitory shocks</topic><topic>Welfare</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Dewitte, Ruben</creatorcontrib><creatorcontrib>Merlevede, Bruno</creatorcontrib><creatorcontrib>Rayp, Glenn</creatorcontrib><collection>ECONIS</collection><collection>CrossRef</collection><collection>International Bibliography of the Social Sciences (IBSS)</collection><collection>International Bibliography of the Social Sciences</collection><collection>International Bibliography of the Social Sciences</collection><collection>ProQuest Computer Science Collection</collection><jtitle>Journal of applied econometrics (Chichester, England)</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Dewitte, Ruben</au><au>Merlevede, Bruno</au><au>Rayp, Glenn</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Gains from trade: Demand, supply, and idiosyncratic shocks</atitle><jtitle>Journal of applied econometrics (Chichester, England)</jtitle><date>2024-08</date><risdate>2024</risdate><volume>39</volume><issue>5</issue><spage>870</spage><epage>886</epage><pages>870-886</pages><issn>0883-7252</issn><eissn>1099-1255</eissn><abstract>Summary
Firm‐level sales are often used as a proxy for productivity to quantify welfare gains from trade (GFT) using firm‐level data. This approach ignores the fact that heterogeneity in firm‐level sales is driven by factors other than productivity. Our theoretical and empirical analysis reveals that using sales as a proxy conflates persistent productivity with transitory demand and supply shocks, resulting in an over‐dispersed productivity distribution. Assigning this shock‐inflated productivity to a modeled economy's supply‐side results in overestimated GFT. We show how to obtain unbiased productivity estimates, aggregate trade elasticities, and GFT estimates by exploiting the revenue production function from a single‐source country.</abstract><cop>Chichester</cop><pub>Wiley Periodicals Inc</pub><doi>10.1002/jae.3051</doi><tpages>17</tpages></addata></record> |
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| ispartof | Journal of applied econometrics (Chichester, England), 2024-08, Vol.39 (5), p.870-886 |
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| language | eng |
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| source | Wiley Online Library Journals Frontfile Complete |
| subjects | Demand analysis Econometrics Elasticity Empirical analysis Estimates gains from trade gravity Heterogeneity Productivity productivity distribution Sales Supply & demand trade elasticity transitory shocks Welfare |
| title | Gains from trade: Demand, supply, and idiosyncratic shocks |
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