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The role of intermediaries in facilitating trade

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Author Info

  • Ahn, JaeBin
  • Khandelwal, Amit K.
  • Wei, Shang-Jin

Abstract

This paper documents that intermediaries play an important role in facilitating international trade. We modify a heterogeneous firm model to allow for an intermediary sector. The model predicts that firms will endogenously select their mode of export - either directly or indirectly through an intermediary - based on productivity. The model also predicts that intermediaries will be relatively more important in markets that are more difficult to penetrate. We provide empirical confirmation for these predictions using the firm-level census of China's trade, and generate new facts regarding the activity of intermediaries. We also provide evidence that firms begin to export directly after exporting through intermediaries.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 84 (2011)
Issue (Month): 1 (May)
Pages: 73-85

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Handle: RePEc:eee:inecon:v:84:y:2011:i:1:p:73-85

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Web page: http://www.elsevier.com/locate/inca/505552

Related research

Keywords: China Intermediaries Heterogeneous firms Middlemen Trade costs;

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References

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