This paper documents the market power of large buyers in foreign input markets, and evaluates its effect on the aggregate economy. I develop an empirical methodology to consistently estimate buyer power at the firm level, and apply it using longitudinal data on trade and production of French manufacturing firms from 1996-2007. My results show that the buyer power of large French importers is substantial, concentrated in key sectors, and it correlates with the size and productivity of the firm. I then incorporate heterogeneous buyer power in a general equilibrium model, and show that it induces large distortionary effects on the aggregate economy, worth about 3% of gross manufacturing output in France. In spite of such output distortions, total real income could potentially increase, due to transfers of rents from the foreign to the domestic economy. My analysis suggests that policies that spur import market integration can play a role in stimulating aggregate production.
Work in Progress
International Prices and Cost Shocks: The Shock Matters
A Sufficient Statistic Result for Estimating Firm-Level Pass-Through (with C. Arkolakis)