IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

OECD imports: diversification of suppliers and quality search

  • Olivier Cadot
  • Céline Carrère
  • Vanessa Strauss-Kahn


We posit that OECD buyers are in a continuous search for best quality suppliers from developing countries. We build a simple model of adverse selection and quality screening which captures this feature. The model predicts that diversification happens by “bouts”, or temporary episodes, during which OECD buyers search for high-quality suppliers. Each diversification episode is followed by a phase of re-concentration on the best performers, until those fail (which happens stochastically), triggering new search phases. The model also shows that concentration across origin is highly volatile, especially for goods with high-quality heterogeneity. Finally, as the set of suppliers expands and buyers continue sampling, the overall trend is an increased diversification across time. We empirical explore these conjectures using OECD imports over time (1963–2006) and measuring their concentration across 250 origin countries at the product level (1,300 products). We provide strong empirical evidence corroborating the model predictions. Copyright Kiel Institute 2014

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Springer in its journal Review of World Economics.

Volume (Year): 150 (2014)
Issue (Month): 1 (February)
Pages: 1-24

in new window

Handle: RePEc:spr:weltar:v:150:y:2014:i:1:p:1-24
Contact details of provider: Postal: Kiellinie 66, D-24105 Kiel
Phone: +49 431 8814-1
Fax: +49 431 8814528
Web page:

More information through EDIRC

Order Information: Web:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Aleksandra PARTEKA, 2007. "Employment and Export Specialization Patterns versus GDP Per Capita Performance - Unifying Approach," Working Papers 302, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  2. Amit Khandelwal, 2009. "The Long and Short (of) Quality Ladders," NBER Working Papers 15178, National Bureau of Economic Research, Inc.
  3. Hausmann, Ricardo & Rodrik, Dani, 2002. "Economic Development as Self-Discovery," Working Paper Series rwp02-023, Harvard University, John F. Kennedy School of Government.
  4. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
  5. Hausmann, Ricardo & Hwang, Jason & Rodrik, Dani, 2005. "What You Export Matters," Working Paper Series rwp05-063, Harvard University, John F. Kennedy School of Government.
  6. Kasahara, Hiroyuki & Rodrigue, Joel, 2008. "Does the use of imported intermediates increase productivity? Plant-level evidence," Journal of Development Economics, Elsevier, vol. 87(1), pages 106-118, August.
  7. repec:oup:qjecon:v:126:y:2011:i:1:p:417-474 is not listed on IDEAS
  8. Rauch, James E. & Watson, Joel, 2003. "Starting small in an unfamiliar environment," International Journal of Industrial Organization, Elsevier, vol. 21(7), pages 1021-1042, September.
  9. Maria Bas & Vanessa Strauss-Kahn, 2014. "Does importing more inputs raise exports? Firm-level evidence from France," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 150(2), pages 241-275, May.
  10. Coe, David T & Helpman, Elhanan, 1993. "International R&D Spillovers," CEPR Discussion Papers 840, C.E.P.R. Discussion Papers.
  11. Olivier Cadot & Céline Carrère & Vanessa Strauss-Kahn, 2011. "Export Diversification: What's behind the Hump?," The Review of Economics and Statistics, MIT Press, vol. 93(2), pages 590-605, May.
  12. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  13. Parteka, Aleksandra & Tamberi, Massimo, 2013. "Product diversification, relative specialisation and economic development: Import–export analysis," Journal of Macroeconomics, Elsevier, vol. 38(PA), pages 121-135.
  14. Juan Carlos Hallak & Peter K. Schott, 2008. "Estimating Cross-Country Differences in Product Quality," NBER Working Papers 13807, National Bureau of Economic Research, Inc.
  15. Esteban Jaimovich, 2012. "Import Diversification along the Growth Path," Carlo Alberto Notebooks 242, Collegio Carlo Alberto.
  16. Kugler, Maurice & Verhoogen, Eric, 2009. "The Quality-Complementarity Hypothesis: Theory and Evidence from Colombia," IZA Discussion Papers 3932, Institute for the Study of Labor (IZA).
  17. Mélise Jaud, 2011. "Food safety, reputation and trade," Working Papers halshs-00586310, HAL.
  18. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
  19. Pinelopi Koujianou Goldberg & Amit Kumar Khandelwal & Nina Pavcnik & Petia Topalova, 2010. "Imported Intermediate Inputs and Domestic Product Growth: Evidence from India," The Quarterly Journal of Economics, Oxford University Press, vol. 125(4), pages 1727-1767.
  20. Hanson, Gordon H, 1996. "Localization Economies, Vertical Organization, and Trade," American Economic Review, American Economic Association, vol. 86(5), pages 1266-78, December.
  21. Richard Baldwin & James Harrigan, 2007. "Zeros, Quality and Space: Trade Theory and Trade Evidence," NBER Working Papers 13214, National Bureau of Economic Research, Inc.
  22. Brenton, Paul & Newfarmer, Richard, 2007. "Watching more than the Discovery channel : export cycles and diversification in development," Policy Research Working Paper Series 4302, The World Bank.
  23. repec:oup:qjecon:v:119:y:2004:i:2:p:646-677 is not listed on IDEAS
  24. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2006. "Trading Partners and Trading Volumes," DEGIT Conference Papers c011_022, DEGIT, Dynamics, Economic Growth, and International Trade.
  25. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
  26. Heski Bar-Isaac, 2003. "Reputation and Survival: Learning in a Dynamic Signalling Model," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 231-251.
  27. shepherd, Ben, 2010. "Geographical Diversification of Developing Country Exports," World Development, Elsevier, vol. 38(9), pages 1217-1228, September.
  28. Kee, Hiau Looi & Nicita, Alessandro & Olarreaga, Marcelo, 2006. "Estimating trade restrictiveness indices," Policy Research Working Paper Series 3840, The World Bank.
  29. Jean Imbs & Romain Wacziarg, 2003. "Stages of Diversification," Post-Print hal-00612598, HAL.
  30. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
  31. Wolfgang Keller, 2001. "International Technology Diffusion," NBER Working Papers 8573, National Bureau of Economic Research, Inc.
  32. David Aristei & Davide Castellani & Chiara Franco, 2011. "Firms' exporting and importing activities: is there a two-way relationship?," Quaderni del Dipartimento di Economia, Finanza e Statistica 99/2011, Università di Perugia, Dipartimento Economia.
  33. Tibor Besedes & Thomas Prusa, 2006. "Ins, outs, and the duration of trade," Canadian Journal of Economics, Canadian Economics Association, vol. 39(1), pages 266-295, February.
  34. World Bank, 2011. "World Development Indicators 2011," World Bank Publications, The World Bank, number 2315.
  35. Klinger, Bailey & Lederman, Daniel, 2004. "Discovery and development : an empricial exploration of"new"products," Policy Research Working Paper Series 3450, The World Bank.
  36. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-77, March.
  37. David Hummels & Peter J. Klenow, 2005. "The Variety and Quality of a Nation's Exports," American Economic Review, American Economic Association, vol. 95(3), pages 704-723, June.
  38. Christian Broda & David E. Weinstein, 2006. "Globalization and the Gains From Variety," The Quarterly Journal of Economics, Oxford University Press, vol. 121(2), pages 541-585.
  39. repec:oup:qjecon:v:127:y:2012:i:1:p:379-436 is not listed on IDEAS
  40. Simeon Djankov & Caroline Freund & Cong S. Pham, 2010. "Trading on Time," The Review of Economics and Statistics, MIT Press, vol. 92(1), pages 166-173, February.
  41. Rothschild, Michael, 1974. "A two-armed bandit theory of market pricing," Journal of Economic Theory, Elsevier, vol. 9(2), pages 185-202, October.
  42. Kalina Manova & Zhiwei Zhang, 2009. "Export Prices Across Firms and Destinations," NBER Working Papers 15342, National Bureau of Economic Research, Inc.
  43. Tibor Besedes & Thomas J. Prusa, 2004. "Surviving the U.S. Import Market: The Role of Product Differentiation," NBER Working Papers 10319, National Bureau of Economic Research, Inc.
  44. Leland, Hayne E, 1979. "Quacks, Lemons, and Licensing: A Theory of Minimum Quality Standards," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1328-46, December.
  45. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," The Quarterly Journal of Economics, Oxford University Press, vol. 123(2), pages 441-487.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:spr:weltar:v:150:y:2014:i:1:p:1-24. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)

or (Christopher F Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.