Citation

Discussion Paper Details

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Title: Markets and Markup: A New Empirical Framework and Evidence on Exporters from China

Author(s): Giancarlo Corsetti, Meredith A Crowley, Lu Han and Huasheng Song

Publication Date: August 2019

Keyword(s): China, differentiated goods, Exchange Rates, markup elasticity, pricing-to-market, product classification and Trade Elasticity

Programme Area(s): International Macroeconomics and Finance and International Trade and Regional Economics

Abstract: Firms that dominate global trade export to multiple countries and frequently change their foreign destinations. We develop an estimator of the destination-specific markup elasticity to the exchange rate that controls for endogenous market selection. To proxy for firms' power in local markets, we introduce a new classification of products based on Chinese linguistics that distinguishes between highly and less differentiated goods. Using Chinese customs data, we show that controlling for selectivity unveils significant pricing-to-market for highly differentiated goods. Measured in the importer's currency, the prices of highly differentiated goods are more stable than those of less differentiated products.

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Bibliographic Reference

Corsetti, G, Crowley, M, Han, L and Song, H. 2019. 'Markets and Markup: A New Empirical Framework and Evidence on Exporters from China'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13904