GEP Seminar: Javier Cravino University of Michigan)

This is an online event

Title: Input price dispersion across buyers and misallocation ( with Ariel Burstein and Marco Rojas)

 Abstract:  We leverage a comprehensive dataset of electronic invoices from Chilean firms to document new facts on price dispersion across buyers of the same manufactured intermediate goods. Over half of firm-to-firm manufacturing sales are accounted for by products that are purchased by more than one buyer in a given month. Price dispersion is pervasive across all manufacturing sectors, with a range in prices of 40 percentage points across buyers for the average product. Observable characteristics of products and of buyer-seller pairs (including distance, mode of payment, and size of the parties and of the transaction) explain only a small fraction of the variance of price gaps. We use a workhorse model of production networks to quantify the productivity gains from eliminating markup dispersion across buyers of individual products, inferring initial differences in markups from observed price gaps. The increase in aggregate productivity relative to the sales share of treated multi-buyer firms ranges from 2 to 7 percent, depending on the calibration of elasticities of substitution.  The gains from eliminating markup dispersion across buyers are as large as those of eliminating markup dispersion across products.