Samuel Kortum (Yale University)
Jonathan Eaton (Brown University) — Samuel Kortum (Yale University) — Francis Kramarz (CREST(ENSAE))
Customs data and firm-level production data reveal both the heterogeneity and the granularity of individual buyers, and sellers. We seek to capture these firm-level features in a general equilibrium model that is also consistent with observations at the aggregate level. Our model is one of product trade through random meetings. Buyers, who may be households looking for final products or firms looking for inputs, connect with sellers randomly. At the firm level, the model generates predictions for imports, exports, and the share of labor in production broadly consistent with observations on French manufacturers. At the aggregate level, firm-to-firm trade determines bilateral trade shares as well as labor’s share of output in each country.