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Trade Intermediation and the Organization of Exporters

  • Gabriel Felbermayr
  • Benjamin Jung

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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File URL: http://hdl.handle.net/10.1111/j.1467-9396.2011.00971.x
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Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 19 (2011)
Issue (Month): 4 (09)
Pages: 634-648

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Handle: RePEc:bla:reviec:v:19:y:2011:i:4:p:634-648
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  1. Pol Antras & Elhanan Helpman, 2003. "Global Sourcing," Harvard Institute of Economic Research Working Papers 2005, Harvard - Institute of Economic Research.
  2. Antras, Pol & Costinot, Arnaud, 2011. "Intermediated Trade," Scholarly Articles 4784024, Harvard University Department of Economics.
  3. 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.
  4. Romain Aeberhardt & Ines Buono & Harald Fadinger, 2012. "Learning, incomplete contracts and export dynamics: theory and evidence from French firms," Temi di discussione (Economic working papers) 883, Bank of Italy, Economic Research and International Relations Area.
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  8. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
  9. Pol Antràs & Arnaud Costinot, 2010. "Intermediation and Economic Integration," NBER Working Papers 15751, National Bureau of Economic Research, Inc.
  10. Dimitra Petropoulou, 2011. "Information costs, networks and intermediation in international trade," Globalization and Monetary Policy Institute Working Paper 76, Federal Reserve Bank of Dallas.
  11. Felbermayr, Gabriel & Jung, Benjamin, 2011. "Trade intermediation and the organization of exporters," Munich Reprints in Economics 20574, University of Munich, Department of Economics.
  12. Robert C. Feenstra & John Romalis & Peter K. Schott, 2002. "U.S. Imports, Exports, and Tariff Data, 1989-2001," NBER Working Papers 9387, National Bureau of Economic Research, Inc.
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  21. repec:hrv:faseco:4784029 is not listed on IDEAS
  22. Daniel F. Spulber, 1996. "Market Microstructure and Intermediation," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 135-152, Summer.
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  25. Felbermayr, Gabriel J. & Jung, Benjamin, 2011. "Trade intermediation and the organization of exporters," Tübinger Diskussionsbeiträge 331, University of Tübingen, School of Business and Economics.
  26. Gene M. Grossman & Elhanan Helpman, 2002. "Integration Versus Outsourcing In Industry Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 85-120, February.
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