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Carry-Along Trade

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Author Info

  • Andrew B. BERNARD

    ()
    (Tuck School of Business at Dartmouth, Hanover and NBER)

  • Emily J. BLANCHARD

    ()
    (Tuck School of Business at Dartmouth, Hanover)

  • Ilke VAN BEVEREN

    ()
    (KU Leuven, Lessius Department of Business Studies)

  • Hylke Y. VANDENBUSSCHE

    ()
    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

Abstract

Large multi-product firms dominate international trade flows. This paper documents new facts about multi-product manufacturing exporters that are not easily reconciled with existing multi-product models. Using novel linked production and export data at the firm-product level, we find that the overwhelming majority of manufacturing firms export products that they do not produce. Three quarters of the exported products and thirty percent of export value from Belgian manufacturers are in goods that are not produced by the firm, so-called Carry-Along Trade (CAT). The number of CAT products is strongly increasing in firm productivity while the number of produced products that are exported is weakly increasing in firm productivity. We propose a general model of production and sourcing at multi-product firms. While the baseline model fails to reconcile the relationships between firm productivity and the numbers of exported products observed in the data, several demand and supply-side extensions to the model are more successful. Looking at export price data, we find support for a novel theoretical extension based on demand-scope complementarities

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File URL: http://sites.uclouvain.be/econ/DP/IRES/2012020.pdf
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Bibliographic Info

Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2012020.

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Length: 57
Date of creation: 31 Jul 2012
Date of revision:
Handle: RePEc:ctl:louvir:2012020

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References

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  1. Andrew B. Bernard & Marco Grazzi & Chiara Tomasi, 2010. "Intermediaries in International Trade: direct versus indirect modes of export," LEM Papers Series 2010/19, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  2. James E. Rauch & Joel Watson, 2004. "Network Intermediaries in International Trade," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(1), pages 69-93, 03.
  3. Eckel, Carsten & Iacovone, Leonardo & Javorcik, Beata & Neary, J Peter, 2011. "Multi-Product Firms at Home and Away: Cost- versus Quality-based Competence," CEPR Discussion Papers 8186, C.E.P.R. Discussion Papers.
  4. Mrázová, Monika & Neary, J Peter, 2013. "Selection Effects With Heterogeneous Firms," CEPR Discussion Papers 9288, C.E.P.R. Discussion Papers.
  5. Peter K. Schott & Andrew B. Bernard & Stephen J. Redding, 2005. "Products and Productivity," NBER Working Papers 11575, National Bureau of Economic Research, Inc.
  6. De Loecker, Jan & Goldberg, Pinelopi Koujianou & Khandelwal, Amit & Pavcnik, Nina, 2012. "Prices, Markups and Trade Reform," CEPR Discussion Papers 8900, C.E.P.R. Discussion Papers.
  7. Carsten Eckel & J Peter Neary, 2006. "Multi-Product Firms and Flexible Manufacturing in the Global Economy," Working Papers 200608, School Of Economics, University College Dublin.
  8. Thierry Mayer & Marc J. Melitz & Gianmarco I. P. Ottaviano, 2012. "Market Size, Competition, and the Product Mix of Exporters," CEP Discussion Papers dp1146, Centre for Economic Performance, LSE.
  9. Lucia Foster & John Haltiwanger & Chad Syverson, 2008. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," American Economic Review, American Economic Association, vol. 98(1), pages 394-425, March.
  10. Costas Arkolakis & Marc-Andreas Muendler, 2010. "The Extensive Margin of Exporting Products: A Firm-level Analysis," CESifo Working Paper Series 3309, CESifo Group Munich.
  11. Ahn, JaeBin & Khandelwal, Amit K. & Wei, Shang-Jin, 2011. "The role of intermediaries in facilitating trade," Journal of International Economics, Elsevier, vol. 84(1), pages 73-85, May.
  12. Gianmarco Ottaviano & Thierry Mayer, . "The happy few: the internationalisation of European firms," Blueprints, Bruegel, number 12, June.
  13. Leonardo Iacovone & BeataS. Javorcik, 2010. "Multi-Product Exporters: Product Churning, Uncertainty and Export Discoveries," Economic Journal, Royal Economic Society, vol. 120(544), pages 481-499, 05.
  14. Dimitra Petropoulou, 2007. "Information Costs, Networks and Intermediation in International Trade," Economics Series Working Papers 370, University of Oxford, Department of Economics.
  15. Ali Hortacsu & Chad Syverson, 2009. "Why Do Firms Own Production Chains?," Working Papers 09-31, Center for Economic Studies, U.S. Census Bureau.
  16. repec:spo:wpecon:info:hdl:2441/c8dmi8nm4pdjkuc9g8m210prh is not listed on IDEAS
  17. Akerman, Anders, 2010. "A Theory on the Role of Wholesalers in International Trade based on Economies of Scope," Research Papers in Economics 2010:1, Stockholm University, Department of Economics.
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