American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Pricing-to-Market, Trade Costs, and International Relative Prices
American Economic Review
vol. 98,
no. 5, December 2008
(pp. 1998–2031)
Abstract
International relative prices across industrialized countries show large and systematic deviations from relative purchasing power parity. We embed a model of imperfect competition and variable markups in a quantitative model of international trade. We find that when our model is parameterized to match salient features of the data on international trade and market structure in the United States, it can reproduce deviations from relative purchasing power parity similar to those observed in the data because firms choose to price-to-market. We then examine how pricing-to-market depends on the presence of international trade costs and various features of market structure. (JEL F12, F14, F31)Citation
Atkeson, Andrew, and Ariel Burstein. 2008. "Pricing-to-Market, Trade Costs, and International Relative Prices." American Economic Review, 98 (5): 1998–2031. DOI: 10.1257/aer.98.5.1998Additional Materials
JEL Classification
- F12 Models of Trade with Imperfect Competition and Scale Economies
- F14 Country and Industry Studies of Trade
- F31 Foreign Exchange