Wholesalers in International Trade

Recent empirical research in international trade has revealed overwhelming evidence that, in all countries, a remarkably small proportion of firms report exports in Customs statistics. A large share of these are wholesalers. This suggests that the number of firms active in foreign markets might be much greater than that suggested by a simple count of the firms directly reporting their exports. This paper thus sheds light on the role of wholesalers in international trade. Our model, which allows for quality differentiation, uses very general assumptions to show that intermediated exporters may contribute significantly to the extension of countries’ export opportunities. The model predicts a twofold role in international trade. First, wholesalers help less-efficient firms to supply foreign markets, thus increasing the number of exported varieties at the aggregate level. Second, they alleviate the difficulty of reaching less-accessible markets. We use French firm-level export data to provide empirical support for these two predictions.