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Learning, Incomplete Contracts and Export Dynamics: Theory and Evidence from French Firms

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  • R. AEBERHARDT

    (Insee)

  • I. BUONO

    (Banca d'italia)

  • H. FADINGER

    (Department of Economics,University of Vienna)

Abstract

We consider a model where exporting requires finding a local partner in each market. Contracts are incomplete and exporters must learn the reliability of their partners through experience. In the model, export behavior is state-dependent due to matching frictions, although there are no sunk costs. Better legal institutions alleviate contracting frictions especially in sectors with large contracting problems. Thus, measures of legal quality help reduce the risk that a match between an exporter and a local distributor splits, and they are all the more effective in sectors that are more exposed to hold-up problems. Moreover, the breaking risk declines with the age of the relationship, as unreliable partners are weeded out. We find strong evidence in favor of the model's predictions when testing them with a French dataset that includes information on firm-level exports by destination country.

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Bibliographic Info

Paper provided by Institut National de la Statistique et des Etudes Economiques, DESE in its series Documents de Travail de la DESE - Working Papers of the DESE with number g2011-16.

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Date of creation: 2011
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Handle: RePEc:crs:wpdeee:g2011-16

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Keywords: Trade Dynamics; Learning; Incomplete Contracts; State dependence; Firm-level Trade Data;

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References

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Citations

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Cited by:
  1. Gabriel J Felbermayr & Benjamin Jung, 2009. "Trade Intermediation and the Organization of Exporters," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 309/2009, Department of Economics, University of Hohenheim, Germany.
  2. Mohammad Movahedi & Olivier Gaussens, 2013. "Les effets de l’exportation sur l’innovation et la productivité : Analyse empirique sur un échantillon de PMI," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201307, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  3. Ines Buono & Harald Fadinger & Stefan Berger, 2008. "The Micro Dynamic of Exporting-Evidence from French Firms," Vienna Economics Papers 0901, University of Vienna, Department of Economics.
  4. Söderlund, Bengt & Gustavsson Tingvall, Patrik, 2012. "Dynamic Effects of Institutions on Firm-Level Exports," Ratio Working Papers 184, The Ratio Institute.
  5. Felbermayr, Gabriel & Spiegel, Gilbert, 2013. "A Simple Theory of Trade, Finance and Firm Dynamics," Munich Reprints in Economics 20353, University of Munich, Department of Economics.
  6. Luis Araujo & Giordano Mion & Emanuel Ornelas, 2012. "Institutions and export dynamics," Working Paper Research 220, National Bank of Belgium.
  7. Tingvall, Patrik, 2011. "Dynamic Effects of Corruption on Offshoring," Ratio Working Papers 182, The Ratio Institute.
  8. Massimiliano Bratti & Giulia Felice, 2012. "Buyer-Supplier Relationships, Internationalization and Product Innovation," Development Working Papers 327, Centro Studi Luca d\'Agliano, University of Milano, revised 13 Nov 2012.
  9. Heyman, Fredrik & Gustavsson Tingvall, Patrik, 2012. "The Dynamics of Offshoring and Institutions," Working Paper Series 919, Research Institute of Industrial Economics.

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