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Trade intermediation and the organization of exporters

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  • Felbermayr, Gabriel J.
  • Jung, Benjamin

Abstract

The business literature and recent descriptive evidence show that exporting firms typically require the help of foreign trade intermediaries or need to set up own foreign wholesale affiliates. In contrast, conventional trade theory models assume that producers can directly access foreign consumers. This paper introduces intermediaries in an international trade model where producers differ with respect to productivity as well as regarding their varieties' perceived quality and tradability. We assume that trade intermediation is prone to frictions due to the absence of enforceable cross-country contracts while own wholesale subsidiaries require capital investment. We derive the sorting pattern of firms according to their degree of competitive advantage and show how the relative prevalence of intermediation depends on the degree of heterogeneity among producers, on the importance of market-specificity of goods, or on expropriation risk. We use US export data for 50 sectors and 133 destination countries to check the empirical validity of this predictions and find robust empirical support. --

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Bibliographic Info

Paper provided by University of Tübingen, School of Business and Economics in its series Tübinger Diskussionsbeiträge with number 331.

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Date of creation: 2011
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Handle: RePEc:zbw:tuedps:331

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Keywords: Trade intermediation; international trade; heterogeneous firms; incomplete contracts;

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References

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  1. Jennifer Abel-Koch, 2011. "Firm Size and the Choice of Export Mode," Working Papers 1105, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, revised 29 Mar 2011.
  2. Sebastian Krautheim, 2007. "Export-Supporting FDI," Economics Working Papers ECO2007/24, European University Institute.
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  7. Nunn, Nathan, 2007. "Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade," Scholarly Articles 4686801, Harvard University Department of Economics.
  8. Dimitra Petropoulou, 2007. "Information Costs, Networks and Intermediation in International Trade," Economics Series Working Papers 370, University of Oxford, Department of Economics.
  9. Costinot, Arnaud & Antras, Pol, 2010. "Intermediation and Economic Integration," Scholarly Articles 4784026, Harvard University Department of Economics.
  10. Antràs, Pol & Costinot, Arnaud, 2010. "Intermediated Trade," CEPR Discussion Papers 7696, C.E.P.R. Discussion Papers.
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  14. Gabriel Felbermayr & Benjamin Jung, 2011. "Trade Intermediation and the Organization of Exporters," Review of International Economics, Wiley Blackwell, vol. 19(4), pages 634-648, 09.
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  17. Dimitra Petropoulou, 2007. "Competing for Contacts: Network Competition, Trade Intermediation and Fragmented Duopoly," Economics Series Working Papers 371, University of Oxford, Department of Economics.
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Citations

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Cited by:
  1. Dimitra Petropoulou, 2007. "Information Costs, Networks and Intermediation in International Trade," Economics Series Working Papers 370, University of Oxford, Department of Economics.
  2. Ronald B Davies & Tine Jeppesen, 2012. "Export mode, Trade Costs, and Productivity Sorting," Working Papers 201225, School Of Economics, University College Dublin.
  3. Romain Aeberhardt & Ines Buono & Harald Fadinger, 2009. "Learning, Incomplete Contracts and Ecport Dynamics: Theory and Evidence from French Firms," Vienna Economics Papers 1006, University of Vienna, Department of Economics.
  4. Andrew B. Bernard & Marco Grazzi & Chiara Tomasi, 2011. "Intermediaries in International Trade: Direct versus indirect modes of export," NBER Working Papers 17711, National Bureau of Economic Research, Inc.
  5. Gaigne, Carl & Latouche, Karine & Turolla, Stephane, 2012. "Vertical Ownership and Trade: Firm-level evidence from France," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 125020, Agricultural and Applied Economics Association.
  6. Jennifer Abel-Koch, . "Who uses intermediaries in international trade? Evidence from firm-level survey data," Discussion Papers 11/25, University of Nottingham, GEP.
  7. Felbermayr, Gabriel J. & Jung, Benjamin, 2011. "Trade intermediation and the organization of exporters," Tübinger Diskussionsbeiträge 331, University of Tübingen, School of Business and Economics.
  8. Matthieu Crozet & Guy Lalanne & Sandra Poncet, 2010. "Wholesalers in International Trade," Working Papers 2010-31, CEPII research center.
  9. Luis Araujo & Giordano Mion & Emanuel Ornelas, 2012. "Institutions and export dynamics," Working Paper Research 220, National Bank of Belgium.
  10. Fergal McCann, 2010. "Indirect Exporters," Working Papers 2010-22, CEPII research center.

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