Indirect Exports and Wholesalers: Evidence from interfirm transaction network data

A substantial fraction of international trade is facilitated by wholesalers, which enable manufacturers to indirectly export their products to foreign markets. Using large-scale Japanese interfirm transaction network data, this paper unveils the features of both indirect and direct exporters. We first build a simple Melitz-type model of trade in which firms can also export indirectly via intermediaries. The model predicts sorting of firms to direct, indirect, and non-exporters along the size dimension. This pattern is confirmed in the data as the distributions of sales, in-degree (the number of suppliers), out-degree (the number of customers), and labor productivity are ordered for direct, indirect, and non-exporters in terms of first order stochastic dominance. We then perform multinomial logit analysis for the three modes of export. Consistent with the model, the estimated intercept is lower and slope of sales is steeper for direct exporting. We also find that in-degree raises the probability of direct exporting, implying a cost sharing mechanism of firms with more suppliers. Out-degree raises the probability of exporting in general (both indirect and direct). This implies a higher product appeal and broader demand base for firms which have more customers in the domestic market. Industry heterogeneity in the propensity of indirect and direct exporting is also analyzed.