Suppliers Searching, Concentration and Misallocation – Chek Yin Choi

Sprecher

Chek Yin Choi (Stockholm University)

Abstract

I analyze how falling search costs - driven by improvements in communications and transportation technology since the late 1990s - have affected allocative efficiency and firm size distribution. Lower costs have enabled smaller firms to source inputs internationally, reflected in the declining size of median and lower-percentile importers. Meanwhile, top importers have also grown, driving up firm size dispersion. I suspect these trends originate from the structure of the intermediate goods market. In Swedish import data, I find that input prices exhibit rising variance and are negatively correlated with productivity. Based on my empirical findings, I develop a quantitative search-and-bargaining model in which search costs serve as both expansion cost and entry barrier. I find that the decrease of search cost sometimes favor the most productive firms and sometimes smaller ones. Consequently, market concentration respond non-monotonically to changes in search costs.

Raum

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