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Learning and the Value of Relationships in International Trade

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  • Ryan Monarch
  • Tim Schmidt-Eisenlohr

Abstract

How valuable are long-term supplier relationships? To address this question, this paper explores relationships between U.S. importers and their suppliers abroad. We first establish several facts: almost half of U.S. imports are in relationships three years or older, relationship survival and traded quantity increase as a relationship ages, and long-term relationships were more resilient in the 2008/9 financial crisis. Based on these findings, we present a model of importer learning and calibrate it using our data. We estimate large differences in the value of relationships across countries. Counterfactuals show that relationships are central to trade flows following external shocks.

Suggested Citation

  • Ryan Monarch & Tim Schmidt-Eisenlohr, 2016. "Learning and the Value of Relationships in International Trade," CESifo Working Paper Series 5724, CESifo.
    • Handle: RePEc:ces:ceswps:_5724
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    References listed on IDEAS

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    Citations

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    Cited by:

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    2. Niepmann, Friederike & Schmidt-Eisenlohr, Tim, 2017. "No guarantees, no trade: How banks affect export patterns," Journal of International Economics, Elsevier, vol. 108(C), pages 338-350.
    3. Carballo, Jeronimo & Ottaviano, Gianmarco I.P. & Volpe Martincus, Christian, 2018. "The buyer margins of firms' exports," Journal of International Economics, Elsevier, vol. 112(C), pages 33-49.
    4. Muendler, Marc-Andreas & Rauch, James E., 2018. "Do employee spinoffs learn markets from their parents? Evidence from international trade," European Economic Review, Elsevier, vol. 105(C), pages 159-173.
    5. Alvaro Garcia-Marin & Santiago Justel & Tim Schmidt-Eisenlohr, 2019. "Trade Credit, Markups, and Relationships," CESifo Working Paper Series 7600, CESifo.
    6. Ma, Lin & Ruzic, Dimitrije, 2020. "Globalization and top income shares," Journal of International Economics, Elsevier, vol. 125(C).
    7. C.J. Krizan & James Tybout & Zi Wang & Yingyan Zhao, 2020. "Are Customs Records Consistent Across Countries? Evidence from the U.S. and Colombia," Working Papers 20-11, Center for Economic Studies, U.S. Census Bureau.
    8. Matilde Bombardini & C. Keith Head & Maria D. Tito & Ruoying Wang, 2021. "How the breadth and depth of import relationships affect the performance of Canadian manufacturers," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(4), pages 1525-1561, November.
    9. Martin, Julien & Mejean, Isabelle & Parenti, Mathieu, 2020. "Relationship stickiness, international trade, and economic uncertainty," CEPR Discussion Papers 15609, C.E.P.R. Discussion Papers.
    10. Sebastian Heise, 2016. "Firm-to-Firm Relationships and Price Rigidity - Theory and Evidence," CESifo Working Paper Series 6226, CESifo.
    11. Ryan Monarch, 2014. ""It's Not You, It's Me": Breakup In U.S.-China Trade Relationships," Working Papers 14-08, Center for Economic Studies, U.S. Census Bureau.
    12. Peter S. Eppinger & Nicole Meythaler & Marc-Manuel Sindlinger & Marcel Smolka, 2018. "The great trade collapse and the Spanish export miracle: Firm-level evidence from the crisis," The World Economy, Wiley Blackwell, vol. 41(2), pages 457-493, February.
    13. Carballo, Jerónimo & Rodriguez Chatruc, Marisol & Salas Santa, Catalina & Volpe Martincus, Christian, 2022. "Online business platforms and international trade," Journal of International Economics, Elsevier, vol. 137(C).
    14. Benguria, Felipe, 2021. "The matching and sorting of exporting and importing firms: Theory and evidence," Journal of International Economics, Elsevier, vol. 131(C).
    15. Peter Schott & Justin Pierce & Georg Schaur & Sebastian Heise, 2017. "Trade Policy Uncertainty and the Structure of Supply Chains," 2017 Meeting Papers 788, Society for Economic Dynamics.

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    More about this item

    Keywords

    international trade; firm relationships; learning; institutions;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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