The impact of price variability on US imports of homogeneous inputs

- I develop a model of homogeneous input sourcing decisions under price uncertainty.
- I estimate the impact of price variability on US imports of homogeneous inputs.
- A country's share of US imports decreases in the level and the variance of its price.

In this paper, I quantify the impact of price variability on homogeneous intermediate goods imports. In product-level data, I find a country's share of US imports is decreasing in the level and the variance of its unit price. This finding is consistent with a model of sourcing decisions in which risk averse final-goods firms choose the optimal distribution of intermediate inputs demand across suppliers.