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Buyer-seller relationships in international trade: Evidence from U.S. States' exports and business-class travel

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  • Cristea, Anca D.

Abstract

International trade has become increasingly dependent on the transmission of complex information, often realized via face-to-face communication. This paper provides novel evidence for the importance of in-person business meetings in international trade. Interactions among trade partners entail a fixed cost of trade, but at the same time they generate relationship capital, which adds bilateral specific value to the traded products. Differences in the face-to-face communication intensity of traded goods, bilateral travel costs and foreign market size determine the optimal amount of interaction between trade partners. Using U.S. state level data on international business-class air travel as a measure of in-person business meetings, I find robust evidence that the demand for business-class air travel is directly related to volume and composition of exports in differentiated products. I also find that trade flows in R&D intensive manufactures and goods facing contractual frictions are most dependent on face-to-face meetings. The econometric identification exploits the cross-state variation in bilateral exports and business-class air travelers by foreign country and time period, circumventing any spurious correlation induced by cross-country differences driving aggregate travel and trade patterns.

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Bibliographic Info

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

Volume (Year): 84 (2011)
Issue (Month): 2 (July)
Pages: 207-220

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Handle: RePEc:eee:inecon:v:84:y:2011:i:2:p:207-220

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

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Keywords: State exports Air travel Fixed export cost Face-to-face communication Relationship intensity Tacit knowledge;

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Citations

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Cited by:
  1. Cristea, Anca & Hillberry, Russell & Mattoo, Aaditya, 2014. "Open skies over the Middle East," Policy Research Working Paper Series 6937, The World Bank.
  2. Yao Li, 2009. "Borders and Distance in Knowledge Spillovers: Dying over Time or Dying with Age? - Evidence from Patent Citations," CESifo Working Paper Series 2625, CESifo Group Munich.
  3. Yilmazkuday, Demet & Yilmazkuday, Hakan, 2014. "The role of direct flights in trade costs," Globalization and Monetary Policy Institute Working Paper 179, Federal Reserve Bank of Dallas.
  4. TANAKA Ayumu, 2013. "Geographic Concentration of Foreign Visitors to Japan," Discussion papers 13008, Research Institute of Economy, Trade and Industry (RIETI).
  5. Alderighi Marco & Gaggero Alberto A., 2012. "Air Accessibility and Export Capability of the Italian Manufacturing Industry," L'industria, Società editrice il Mulino, issue 4, pages 635-662.
  6. Sheard, Nicholas, 2014. "Airports and urban sectoral employment," Journal of Urban Economics, Elsevier, vol. 80(C), pages 133-152.
  7. Galina Hale & Christopher Candelaria & Julian Caballero & Sergey Borisov, 2013. "Bank linkages and international trade," Working Paper Series 2013-14, Federal Reserve Bank of San Francisco.
  8. Sheard, Nicholas, 2012. "Airports and the Production of Goods and Services," Research Papers in Economics 2012:7, Stockholm University, Department of Economics, revised 17 Jan 2013.
  9. Nune Hovhannisyan & Wolfgang Keller, 2011. "International Business Travel: An Engine of Innovation?," NBER Working Papers 17100, National Bureau of Economic Research, Inc.
  10. Bruce A. Blonigen & Anca D. Cristea, 2012. "Airports and Urban Growth: Evidence from a Quasi-Natural Policy Experiment," NBER Working Papers 18278, National Bureau of Economic Research, Inc.
  11. Nicholas Sheard, 2012. "The effect of air transport on the production of goods and services," ERSA conference papers ersa12p429, European Regional Science Association.
  12. Marco Alderighi, 2013. "Air accessibility and the export of Italian manufacture in Europe: Evidence at regional level," ERSA conference papers ersa13p1304, European Regional Science Association.

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