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Entrepreneurship in International Trade

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Author Info
J Rauch
Joel Watson (UC San Diego)

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Abstract

Motivated by evidence on the importance of incomplete information and networks in international trade, we investigate the supply of "network intermediation." We hypothesize that the agents who become international trade intermediaries first accumulate networks of foreign contacts while working as employees in production or sales, then become entrepreneurs who sell access to and use of the networks they accumulated. We report supportive results regarding this hypothesis from a pilot survey of international trade intermediaries. We then build a simple general-equilibrium model of this type of entrepreneurship, and use it for comparative statics and welfare analysis. One welfare conclusion is that intermediaries may have inadequate incentives to maintain or expand their networks, suggesting a rationale for the policies followed by some countries to encourage large-scale trading companies that imitate the Japanese sogo shosha.

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File URL: http://repositories.cdlib.org/cgi/viewcontent.cgi?article=1140&context=ucsdecon
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Paper provided by Department of Economics, UC San Diego in its series University of California at San Diego, Economics Working Paper Series with number 2001-20.

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Date of creation: 01 Dec 2001
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Handle: RePEc:cdl:ucsdec:2001-20

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Related research
Keywords: international trade; network intermediation;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Portes, Richard & Rey, Hélène, 1999. "The Determinants of Cross-Border Equity Flows," CEPR Discussion Papers 2225, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Blackwell Publishing, vol. 57(2), pages 279-98, April. [Downloadable!] (restricted)
  3. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June. [Downloadable!] (restricted)
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  4. Rhee, Yung Whee, 1990. "The catalyst model of development: Lessons from Bangladesh's success with garment exports," World Development, Elsevier, vol. 18(2), pages 333-346, February. [Downloadable!] (restricted)
  5. James E. Rauch & Alessandra Casella, 2001. "Overcoming Informational Barriers to International Resource Allocation: Prices and Ties," University of California at San Diego, Economics Working Paper Series 2001-18, Department of Economics, UC San Diego. [Downloadable!]
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  6. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn. [Downloadable!] (restricted)
  7. Avinash Dixit, 2001. "On Modes of Economic Governance," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  8. Carolyn L. Evans, 2001. "Home bias in trade: location or foreign-ness?," Staff Reports 128, Federal Reserve Bank of New York. [Downloadable!]
  9. Spulber, Daniel F, 1996. "Market Microstructure and Intermediation," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 135-52, Summer. [Downloadable!] (restricted)
  10. Stahl, Dale O, II, 1988. "Bertrand Competition for Inputs and Walrasian Outcomes," American Economic Review, American Economic Association, vol. 78(1), pages 189-201, March. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. James Rauch & Joel Watson, 2003. "Are There Too Many Entrepeneurs? A Model of Client-Based Entrepreneurship," Berkeley Olin Program in Law & Economics, Working Paper Series 1086, Berkeley Olin Program in Law & Economics. [Downloadable!]
  2. T. Huw Edwards, 2006. "Search and the Path-Dependency of Trade," Discussion Paper Series 2006_12, Department of Economics, Loughborough University, revised May 2006. [Downloadable!]
  3. Hausmann, Ricardo & Rodrik, Dani, 2002. "Economic Development as Self-Discovery," Working Paper Series rwp02-023, Harvard University, John F. Kennedy School of Government. [Downloadable!]
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