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Learning and the Value of Relationships in International Trade

Listed author(s):
  • Ryan Monarch
  • Tim Schmidt-Eisenlohr

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.

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File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp5724.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 5724.

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Date of creation: 2016
Handle: RePEc:ces:ceswps:_5724
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  1. George Alessandria & Horag Choi & Kim Ruhl, 2014. "Trade Adjustment Dynamics and the Welfare Gains from Trade," Working Papers 14-11, New York University, Leonard N. Stern School of Business, Department of Economics.
  2. 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.
  3. repec:red:issued:15-260 is not listed on IDEAS
  4. Sebastian Heise, 2016. "Firm-to-Firm Relationships and Price Rigidity - Theory and Evidence," CESifo Working Paper Series 6226, CESifo Group Munich.
  5. Araujo, Luis & Mion, Giordano & Ornelas, Emanuel, 2016. "Institutions and export dynamics," Journal of International Economics, Elsevier, vol. 98(C), pages 2-20.
  6. Bernard, Andrew B. & Moxnes, Andreas & Ulltveit-Moe, Karen-Helene, 2013. "Two-sided Heterogeneity and Trade," CEPR Discussion Papers 9681, C.E.P.R. Discussion Papers.
  7. Kamal, Fariha & Sundaram, Asha, 2016. "Buyer–seller relationships in international trade: Do your neighbors matter?," Journal of International Economics, Elsevier, vol. 102(C), pages 128-140.
  8. Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, vol. 83(3), pages 525-548, June.
  9. Alessandria, George & Choi, Horag, 2014. "Establishment heterogeneity, exporter dynamics, and the effects of trade liberalization," Journal of International Economics, Elsevier, vol. 94(2), pages 207-223.
  10. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
  11. Olga Timoshenko & Paulo Bastos & Daniel Dias, 2016. "Learning, Prices, and Firm Dynamics," Working Papers 2016-11, The George Washington University, Institute for International Economic Policy.
  12. Timoshenko, Olga A., 2015. "Learning versus sunk costs explanations of export persistence," European Economic Review, Elsevier, vol. 79(C), pages 113-128.
  13. Jonathan Eaton & Samuel Kortum & Brent Neiman & John Romalis, 2016. "Trade and the Global Recession," American Economic Review, American Economic Association, vol. 106(11), pages 3401-3438, November.
  14. Fariha Kamal & C.J. Krizan & Ryan Monarch, 2015. "Identifying Foreign Suppliers in U.S. Merchandise Import Transactions," Working Papers 15-11, Center for Economic Studies, U.S. Census Bureau.
  15. Tibor Besedeš, 2008. "A Search Cost Perspective on Formation and Duration of Trade," Review of International Economics, Wiley Blackwell, vol. 16(5), pages 835-849, November.
  16. Costas Arkolakis & Theodore Papageorgiou & Olga Timoshenko, . "Firm Learning and Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics.
    • Costas Arkolakis & Theodore Papageorgiou & Olga A. Timoshenko, 2015. "Firm Learning and Growth," Working Papers 2015-5, The George Washington University, Institute for International Economic Policy.
  17. Egan, Mary Lou & Mody, Ashoka, 1992. "Buyer-seller links in export development," World Development, Elsevier, vol. 20(3), pages 321-334, March.
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