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Carry-Along Trade

  • Bernard, Andrew B.
  • Blanchard, Emily
  • van Beveren, Ilke
  • Vandenbussche, Hylke

Large multi-product firms dominate international trade flows. This paper documents new facts about multi-product manufacturing exporters that are not easily reconciled with existing multi-product models. Using novel linked production and export data at the firm-product level, we find that the overwhelming majority of manufacturing firms export products that they do not produce. Three quarters of the exported products and thirty percent of export value from Belgian manufacturers are in goods that are not produced by the firm, so-called Carry-Along Trade (CAT). The number of CAT products is strongly increasing in firm productivity while the number of produced products that are exported is weakly increasing in firm productivity. We propose a general model of production and sourcing at multi-product firms. While the baseline model fails to reconcile the relationships between firm productivity and the numbers of exported products observed in the data, several demand and supply-side extensions to the model are more successful. Looking at export price data, we find support for a novel theoretical extension based on demand-scope complementarities.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9067.

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Date of creation: Jul 2012
Date of revision:
Handle: RePEc:cpr:ceprdp:9067
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  1. Peter Neary & Carsten Eckel, 2006. "Multi-Product Firms and Flexible Manufacturing in the Global Economy," Economics Series Working Papers 292, University of Oxford, Department of Economics.
  2. Akerman, Anders, 2010. "A Theory on the Role of Wholesalers in International Trade based on Economies of Scope," Research Papers in Economics 2010:1, Stockholm University, Department of Economics.
  3. Mayer, Thierry & Melitz, Marc J & Ottaviano, Gianmarco, 2011. "Market Size, Competition, and the Product Mix of Exporters," CEPR Discussion Papers 8349, C.E.P.R. Discussion Papers.
  4. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2009. "Products and Productivity," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(4), pages 681-709, December.
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  6. Bernard, Andrew B. & Grazzi, Marco & Tomasi, Chiara, 2012. "Intermediaries in International Trade: Direct versus indirect modes of export," CEPR Discussion Papers 8766, C.E.P.R. Discussion Papers.
  7. repec:spo:wpecon:info:hdl:2441/c8dmi8nm4pdjkuc9g8m210prh is not listed on IDEAS
  8. Jan De Loecker & Pinelopi K. Goldberg & Amit K. Khandelwal & Nina Pavcnik, 2012. "Prices, Markups and Trade Reform," NBER Working Papers 17925, National Bureau of Economic Research, Inc.
  9. Gianmarco Ottaviano & Thierry Mayer, . "The happy few: the internationalisation of European firms," Blueprints, Bruegel, number 12, June.
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  12. James E. Rauch & Joel Watson, 2004. "Network Intermediaries in International Trade," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(1), pages 69-93, 03.
  13. Monika Mrázová & J. Peter Neary, 2012. "Selection effects with heterogeneous firms," LSE Research Online Documents on Economics 51521, London School of Economics and Political Science, LSE Library.
  14. Ali Hortacsu & Chad Syverson, 2009. "Why Do Firms Own Production Chains?," Working Papers 09-31, Center for Economic Studies, U.S. Census Bureau.
  15. Costas Arkolakis & Marc-Andreas Muendler, 2010. "The Extensive Margin of Exporting Products: A Firm-level Analysis," CESifo Working Paper Series 3309, CESifo Group Munich.
  16. Dimitra Petropoulou, 2011. "Information costs, networks and intermediation in international trade," Globalization and Monetary Policy Institute Working Paper 76, Federal Reserve Bank of Dallas.
  17. Leonardo Iacovone & BeataS. Javorcik, 2010. "Multi-Product Exporters: Product Churning, Uncertainty and Export Discoveries," Economic Journal, Royal Economic Society, vol. 120(544), pages 481-499, 05.
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