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Pass-on Trade: Why do Firms Simultaneously engage in Two-Way Trade in the Same Varieties?

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  • Jože P. Damijan
  • Jozef Konings
  • Sašo Polanec

Abstract

This paper documents that a large fraction of trade flows at the firm level consists of simultaneous imports and exports in identical products, narrowly defined at the 8-digit product classification, which we call Pass-On Trade, POT. We use data on imports and exports at the firm–product level for Slovenian manufacturing firms in the period 1994-2008, to show that, on average, 70 percent of all exporting firms engage in POT. This corresponds to more than 50 percent of all exported products. Thus, imported products that are exported again by the same firm is a statistical regularity of trade of Slovenian manufacturing firms. We document that the use of POT is increasing in firm size, product diversification, multinational status as well as firm productivity and profitability. We offer and explore empirically a number of explanations for POT. Among possible explanations, we find evidence on the importance of firms’ multinational networks and demand complementarities between firms’ own and POT products. The latter confirms the theoretical explanations for ‘Carry-Along Trade’ (CAT) as developed by the recent work of Bernard et al (2010, 2012).

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Bibliographic Info

Paper provided by LICOS - Centre for Institutions and Economic Performance, KU Leuven in its series LICOS Discussion Papers with number 31212.

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Date of creation: 2012
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Handle: RePEc:lic:licosd:31212

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Keywords: pass-on trade; multi-product firms; two-way trade;

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References

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  1. Andrew B. BERNARD & Emily J. BLANCHARD & Ilke VAN BEVEREN & Hylke Y. VANDENBUSSCHE, 2012. "Carry-Along Trade," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2012020, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  2. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2010. "Wholesalers and Retailers in US Trade," Working Paper Series WP10-10, Peterson Institute for International Economics.
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Cited by:
  1. João Amador & Sónia Cabral, 2014. "Global Value Chains: Surveying Drivers, Measures and Impacts," Working Papers w201403, Banco de Portugal, Economics and Research Department.

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