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Markets and markups : a new empirical framework and evidence on exporters from China

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RSC WP 2023 27_V1.pdf (2.01 MB)
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https://hdl.handle.net/1814/75451
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1028-3625
Issue Date
2023
Type of Publication
Working Paper
Keyword(s)
Exchange rate; Markup elasticity; Pricing-to-market; Trade pattern; Product classification; China; Differentiated goods
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EUI; RSC; Working Paper; 2023/27; Pierre Werner Chair Programme
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CORSETTI, Giancarlo, CROWLEY, Meredith A., HAN, Lu, SONG, Huasheng, Markets and markups : a new empirical framework and evidence on exporters from China, EUI, RSC, Working Paper, 2023/27, Pierre Werner Chair Programme - https://hdl.handle.net/1814/75451
Abstract
Firms that dominate global trade export to multiple countries and frequently change their foreign destinations. We develop a new empirical framework for analysing markup elasticities to the exchange rate in this environment. The framework embodies a new estimator of these elasticities that controls for endogenous market participation and a new classification of products based on Chinese linguistics to proxy for firms’ power in local markets. Applying this framework to Chinese customs data, we document significant pricing-to-market for highly differentiated goods. Measured in the importer’s currency, the prices of highly differentiated goods are far more stable than those of less differentiated products.
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European University Institute
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We thank Cambridge INET, the Centre For Macroeconomics, and the Economic and Social Research Council (United Kingdom) Brexit Priority Grant R001553/1 for supporting our research. We thank the staff of the HMRC datalab, especially Yee-Wan Yau, for supporting us in our analysis of UK administrative data.
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