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A Search Cost Perspective on Formation and Duration of Trade

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  • Tibor Besedeš

Abstract

More than half of all US import relationships begin with less than $10,000 annually. The median relationship is observed to last just one year. The incidence and duration of import relationships are consistent with a search model of international trade. The preponderance of small starting relationships reveals uncertainty present in the formation of trade relationships. Initial size, reliability, and search costs play an important role. Larger initial purchase results in longer relationships. Higher reliability and lower search costs lead to larger initial purchases and longer relationships. Copyright © 2008 The Author. Journal compilation © 2008 Blackwell Publishing Ltd.

Suggested Citation

  • Tibor Besedeš, 2008. "A Search Cost Perspective on Formation and Duration of Trade," Review of International Economics, Wiley Blackwell, vol. 16(5), pages 835-849, November.
  • Handle: RePEc:bla:reviec:v:16:y:2008:i:5:p:835-849
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    References listed on IDEAS

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    1. Volker Nitsch, 2009. "Die another day: duration in German import trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 145(1), pages 133-154, April.
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    Cited by:

    1. Defever, Fabrice & Fischer, Christian & Suedekum, Jens, 2016. "Relational contracts and supplier turnover in the global economy," Journal of International Economics, Elsevier, vol. 103(C), pages 147-165.
    2. Obashi, Ayako, 2010. "Stability of production networks in East Asia: Duration and survival of trade," Japan and the World Economy, Elsevier, vol. 22(1), pages 21-30, January.
    3. Tim Schmidt-Eisenlohr & Ryan Monarch, 2015. "Learning and the Value of Relationships in International Trade," 2015 Meeting Papers 668, Society for Economic Dynamics.
    4. Cadot, Olivier & Iacovone, Leonardo & Pierola, Martha Denisse & Rauch, Ferdinand, 2013. "Success and failure of African exporters," Journal of Development Economics, Elsevier, vol. 101(C), pages 284-296.
    5. Córcoles, David & Díaz-Mora, Carmen & Gandoy, Rosario, 2014. "Product sophistication: A tie that binds partners in international trade," Economic Modelling, Elsevier, vol. 44(S1), pages 33-41.
    6. Lin, Chin-Ho, 2015. "The impact of tariff rates on the probability of trade relationships survival: evidence from ASEAN+6 manufactured goods," MPRA Paper 71260, University Library of Munich, Germany.
    7. Hess, Wolfgang & Persson, Maria, 2010. "The Duration of Trade Revisited: Continuous-Time vs. Discrete-Time Hazards," Working Paper Series 829, Research Institute of Industrial Economics.
    8. Wolfgang Hess & Maria Persson, 2011. "Exploring the duration of EU imports," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 147(4), pages 665-692, November.
    9. David Córcoles & Carmen Díaz-Mora & Rosario Gandoy, 2015. "Export Survival in Global Production Chains," The World Economy, Wiley Blackwell, vol. 38(10), pages 1526-1554, October.
    10. Türkcan, Kemal, 2016. "On the role of vertical differentiation in enhancing survival of export flows: Evidence from a developing country," MPRA Paper 71023, University Library of Munich, Germany.
    11. Tibor Besedeš, 2013. "The Role of NAFTA and Returns to Scale in Export Duration," CESifo Economic Studies, CESifo, vol. 59(2), pages 306-336, June.
    12. Defever, F. & Fischer, C. & Suedekum, J., 2017. "Supplier Search and Re-matching in Global Sourcing - Theory and Evidence from China," Working Papers 17/03, Department of Economics, City University London.
    13. Shi Young Lee, 2010. "Economics of Guanxi as an Interpersonal Investment Game," Review of Development Economics, Wiley Blackwell, vol. 14(2), pages 333-342, May.
    14. Besedes, Tibor & Prusa, Thomas J., 2011. "The role of extensive and intensive margins and export growth," Journal of Development Economics, Elsevier, vol. 96(2), pages 371-379, November.
    15. Defever, Fabrice & Fischer, Christian & Suedekum, Jens, 2017. "Supplier search and re-matching in global sourcing: theory and evidence from China," LSE Research Online Documents on Economics 86605, London School of Economics and Political Science, LSE Library.
    16. Besedes, Tibor, 2011. "Export differentiation in transition economies," Economic Systems, Elsevier, vol. 35(1), pages 25-44, March.
    17. Türkcan, Kemal & Saygili, Hülya, 2017. "On the role of vertical differentiation in enhancing the survival of export flows: Evidence from a developing country," Economics Discussion Papers 2017-81, Kiel Institute for the World Economy (IfW).
    18. Studnicka, Zuzanna & Lawless, Martina, 2018. "Old firms and new products: Does experience increase survival?," Papers WP584, Economic and Social Research Institute (ESRI).
    19. Pişkin, Erhan, 2017. "Türkiye İhracatının Ölüm-Kalım Meselesi
      [The Matter of Survival for Turkish Exports]
      ," MPRA Paper 81459, University Library of Munich, Germany.
    20. Marco Fugazza & Ana Cristina Molina, 2011. "On The Determinants Of Exports Survival," UNCTAD Blue Series Papers 46, United Nations Conference on Trade and Development.
    21. Hess, Wolfgang & Persson, Maria, 2009. "Survival and Death in International Trade - Discrete-Time Durations of EU Imports," Working Papers 2009:12, Lund University, Department of Economics.

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