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CATs and DOGs

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  • Eckel, Carsten
  • Riezman, Raymond

Abstract

There is recent firm level evidence that manufacturing firms export products that they do not produce themselves. Bernard et al. (2016) call this "Carry-Along Trade" (CAT) and show that it is a widespread phenomenon among Belgian manufacturing exports. In this paper, we study why manufacturing firms may decide to have their products carried-along instead of exporting their products themselves. We show that if the "Delivery of Own Goods" (DOG) is an alternative option, the profitability of CAT is determined by demand linkages, transportation cost synergies, and the relative productivities of the CAT and DOG firms. Our focus is on the strategic aspects of CAT, and we illustrate that CAT can produce the same outcomes as product-specific, market-specific collusion.

Suggested Citation

  • Eckel, Carsten & Riezman, Raymond, 2016. "CATs and DOGs," CEPR Discussion Papers 11695, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:11695
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    References listed on IDEAS

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    1. Eckel, Carsten & Riezman, Raymond, 2020. "CATs and DOGs," Journal of International Economics, Elsevier, vol. 126(C).
    2. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007. "Firms in International Trade," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 105-130, Summer.
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    4. Swati Dhingra, 2013. "Trading Away Wide Brands for Cheap Brands," American Economic Review, American Economic Association, vol. 103(6), pages 2554-2584, October.
    5. Carsten Eckel & J. Peter Neary, 2010. "Multi-Product Firms and Flexible Manufacturing in the Global Economy," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 188-217.
    6. Andrew B. Bernard & Marco Grazzi & Chiara Tomasi, 2015. "Intermediaries in International Trade: Products and Destinations," The Review of Economics and Statistics, MIT Press, vol. 97(4), pages 916-920, October.
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    9. Kaleb Girma Abreha & Valérie Smeets & Frédéric Warzynski, 2013. "Coping with the Crisis: Recent Evolution in Danish Firms' International Trade Involvement, 2000-2010," Economics Working Papers 2013-15, Department of Economics and Business Economics, Aarhus University.
    10. Alessia Lo Turco & Daniela Maggioni, 2015. "Imports, Exports and the Firm Product Scope: Evidence From Turkey," The World Economy, Wiley Blackwell, vol. 38(6), pages 984-1005, June.
    11. Ahn, JaeBin & Khandelwal, Amit K. & Wei, Shang-Jin, 2011. "The role of intermediaries in facilitating trade," Journal of International Economics, Elsevier, vol. 84(1), pages 73-85, May.
    12. Virginia Di Nino, 2015. "�The phenomenal CAT�: firms clawing the goods of others," Questioni di Economia e Finanza (Occasional Papers) 281, Bank of Italy, Economic Research and International Relations Area.
    13. Pol Antràs & Arnaud Costinot, 2011. "Intermediated Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 126(3), pages 1319-1374.
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    Cited by:

    1. Ariu, Andrea & Mayneris, Florian & Parenti, Mathieu, 2020. "One way to the top: How services boost the demand for goods," Journal of International Economics, Elsevier, vol. 123(C).
    2. Erbahar, Aksel & Rebeyrol, Vincent, 2021. "Trade Intermediation by Producers," TSE Working Papers 21-1265, Toulouse School of Economics (TSE), revised Sep 2022.
    3. Eckel, Carsten & Riezman, Raymond, 2020. "CATs and DOGs," Journal of International Economics, Elsevier, vol. 126(C).

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    More about this item

    Keywords

    Carry-Along Trade; Collusion; Mode of Exporting; multi-product firms;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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