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American Economic Review Vol. 104 No. 3 2014

Trade Adjustment and Productivity in Large Crises

Gita Gopinath1; Brent Neiman2

1 Department of Economics, Harvard University, Littauer Center 206, Cambridge, MA 02138 (e-mail: ) · 2 Booth School of Business, University of Chicago, 5807 S. Woodlawn Ave., Chicago, IL 60637 (e-mail: )

Abstract

We empirically characterize the mechanics of trade adjustment during the Argentine crisis. Though imports collapsed by 70 percent from 2000 to 2002, the entry and exit of firms or products at the country level played a small role. The within-firm churning of imported inputs, however, played a sizeable role. We build a model of trade in intermediate inputs with heterogeneous firms, fixed import costs, and roundabout production. Import demand is non-homothetic and the implications of an import price shock depend on the full distribution of firm-level adjustments. An import price shock generates a significant decline in productivity.

DOI
10.1257/aer.104.3.793
Volume
104
Issue
3
Pages
793-831
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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