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Learning, incomplete contracts and export dynamics: theory and evidence from French firms

Author

Listed:
  • Romain Aeberhardt

    (CREST)

  • Ines Buono

    (Bank of Italy)

  • Harald Fadinger

    (University of Vienna)

Abstract

Using French firm-level trade data, we provide empirical support for a heterogeneous firm model in which exporting requires finding a local partner in each market: contracts are incomplete, exporters must learn the reliability of their partners through experience, and export behaviour is state-dependent due to matching frictions. As predicted by our theoretical model, we find that better legal institutions ease contracting frictions especially in sectors with serious contracting problems. This increases state dependence by more in those sectors. Finally, hazard rates depend on the quality of local legal institutions and decline with the age of the relationship, as unreliable partners are weeded out.

Suggested Citation

  • 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.
  • Handle: RePEc:bdi:wptemi:td_883_12
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    trade dynamics; learning; institutions; state dependence; firm-level trade data.;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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