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Carry-Along Trade

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  • Andrew B. Bernard
  • Emily J. Blanchard
  • Ilke Van Beveren
  • Hylke Y. Vandenbussche

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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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18246.

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Date of creation: Jul 2012
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Handle: RePEc:nbr:nberwo:18246

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References

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  1. Andrew B. Bernard & Marco Grazzi & Chiara Tomasi, 2012. "Intermediaries in International Trade: Direct Versus Indirect Modes of Export," CEP Discussion Papers, Centre for Economic Performance, LSE dp1137, Centre for Economic Performance, LSE.
  2. Leonardo Iacovone & BeataS. Javorcik, 2010. "Multi-Product Exporters: Product Churning, Uncertainty and Export Discoveries," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 120(544), pages 481-499, 05.
  3. Thierry Mayer & Marc Melitz & Gianmarco Ottaviano, 2011. "Market Size, Competition, and the Product Mix of Exporters," Working Papers 2011-11, CEPII research center.
  4. Eckel, Carsten & Neary, J Peter, 2006. "Multi-Product Firms and Flexible Manufacturing in the Global Economy," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5941, C.E.P.R. Discussion Papers.
  5. JaeBin Ahn & Amit K. Khandelwal & Shang-Jin Wei, 2010. "The Role of Intermediaries in Facilitating Trade," NBER Working Papers 15706, National Bureau of Economic Research, Inc.
  6. Akerman, Anders, 2010. "A Theory on the Role of Wholesalers in International Trade based on Economies of Scope," Research Papers in Economics, Stockholm University, Department of Economics 2010:1, Stockholm University, Department of Economics.
  7. 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, C.E.P.R. Discussion Papers 8186, C.E.P.R. Discussion Papers.
  8. Monika Mrázová & J. Peter Neary, 2012. "Selection Effects with Heterogeneous Firms," CEP Discussion Papers, Centre for Economic Performance, LSE dp1174, Centre for Economic Performance, LSE.
  9. Andrew B. Bernard & Stephen Redding & Peter K. Schott, 2005. "Products and Productivity," CEP Discussion Papers, Centre for Economic Performance, LSE dp0699, Centre for Economic Performance, LSE.
  10. Dimitra Petropoulou, 2011. "Information costs, networks and intermediation in international trade," Globalization and Monetary Policy Institute Working Paper, Federal Reserve Bank of Dallas 76, Federal Reserve Bank of Dallas.
  11. Foster, Lucia & Haltiwanger, John C. & Syverson, Chad, 2005. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," IZA Discussion Papers 1705, Institute for the Study of Labor (IZA).
  12. Jan De Loecker & Pinelopi K. Goldberg & Amit K. Khandelwal & Nina Pavcnik, 2012. "Prices, Markups and Trade Reform," NBER Working Papers 17925, National Bureau of Economic Research, Inc.
  13. Thierry Mayer & Gianmarco Ottaviano, 2008. "The Happy Few: The Internationalisation of European Firms," Intereconomics: Review of European Economic Policy, Springer, Springer, vol. 43(3), pages 135-148, May.
  14. Costas Arkolakis & Marc-Andreas Muendler, 2010. "The Extensive Margin of Exporting Products: A Firm-level Analysis," NBER Working Papers 16641, National Bureau of Economic Research, Inc.
  15. James E. Rauch & Joel Watson, 2004. "Network Intermediaries in International Trade," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 13(1), pages 69-93, 03.
  16. repec:spo:wpecon:info:hdl:2441/c8dmi8nm4pdjkuc9g8m210prh is not listed on IDEAS
  17. Enghin Atalay & Ali Hortacsu & Chad Syverson, 2012. "Why Do Firms Own Production Chains?," NBER Working Papers 18020, National Bureau of Economic Research, Inc.
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