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

Listed author(s):
  • Romain Aeberhardt

    ()

    (CREST)

  • Ines Buono

    ()

    (Bank of Italy)

  • Harald Fadinger

    ()

    (University of Vienna)

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.

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File URL: http://www.bancaditalia.it/pubblicazioni/temi-discussione/2012/2012-0883/en_tema_883.pdf
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Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 883.

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Date of creation: Oct 2012
Handle: RePEc:bdi:wptemi:td_883_12
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