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Board of Governors of the Federal Reserve System (U.S.)
International Finance Discussion Papers
"It's Not You, It's Me" : Breakups in U.S.-China Trade Relationships
Ryan Monarch
Abstract

Costs to switching suppliers can affect prices by discouraging buyer movements from high to low cost sellers. This paper uses confidential U.S. Customs data on U.S. importers and their Chinese exporters to investigate these costs. I find considerable barriers to supply chain adjustments: 45% of arm’s-length importers keep their partner, and one-third of switching importers remain in the same city. Guided by these regularities, I propose and structurally estimate a dynamic discrete exporter choice model. Cost estimates are large and heterogeneous across products. These costs matter for trade prices: halving switching costs reduces the U.S.- China Import Price Index by 14.7%.


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Ryan Monarch, "It's Not You, It's Me" : Breakups in U.S.-China Trade Relationships, Board of Governors of the Federal Reserve System (U.S.), International Finance Discussion Papers 1165, May 2016.
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Keywords: International Trade ; Import Price ; Transactional Relationships
DOI: 10.17016/IFDP.2016.1165
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