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Trade Intermediation and the Organization of Exporters

The business literature shows that exporting firms typically require the help of foreign trade intermediaries or need to set up own foreign wholesale affiliates. In contrast, conventional trade theory models assume that producers can directly access foreign consumers. This paper models the endogenous emergence of intermediaries in an international trade model where producers differ with respect to productivity as well as regarding their varieties' perceived quality and tradability. We assume that trade intermediation is prone to frictions due to the absence of enorceable cross-country contracts while own wholesale subsidiaries require capital investment. We derive the sorting pattern of firms according to their degree of competitive advantage and show how the relative prevalence of intermediation depends on the degree of heterogeneity among producers, on the importance of market-specificity of goods, or on expropriation risk. We use US export data for 50 sectors and 133 destination countries to check the empirical validity of this predictions and find robust empirical support. JEL classifcation: F12, F23

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File URL: http://www.uni-hohenheim.de/RePEc/hoh/papers/309.pdf
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Paper provided by Department of Economics, University of Hohenheim, Germany in its series Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim with number 309/2009.

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Length: 35 pages
Date of creation: Apr 2009
Date of revision:
Handle: RePEc:hoh:hohdip:309
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Web page: http://www.uni-hohenheim.de/institution/institut-fuer-economics-11
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  1. Gene M. Grossman & Elhanan Helpman, 2002. "Integration Versus Outsourcing In Industry Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 85-120, February.
  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. Aeberhardt, Romain & Buono, Ines & Fadinger, Harald, 2014. "Learning, incomplete contracts and export dynamics: Theory and evidence from French firms," European Economic Review, Elsevier, vol. 68(C), pages 219-249.
  4. Combes, Pierre-Philippe & Lafourcade, Miren & Mayer, Thierry, 2005. "The trade-creating effects of business and social networks: evidence from France," Journal of International Economics, Elsevier, vol. 66(1), pages 1-29, May.
  5. Rubinstein, Yona & Helpman, Elhanan & Melitz, Marc, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," Scholarly Articles 3228230, Harvard University Department of Economics.
  6. Nathan Nunn, 2005. "Relationship Specificity, Incomplete Contracts and the Pattern of Trade," International Trade 0512018, EconWPA.
  7. Gabriel Felbermayr & Benjamin Jung, 2011. "Trade Intermediation and the Organization of Exporters," Review of International Economics, Wiley Blackwell, vol. 19(4), pages 634-648, 09.
  8. Pol Antràs & Arnaud Costinot, 2010. "Intermediated Trade," NBER Working Papers 15750, National Bureau of Economic Research, Inc.
  9. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2006. "Trading Partners and Trading Volumes," DEGIT Conference Papers c011_022, DEGIT, Dynamics, Economic Growth, and International Trade.
  10. Robert C. Feenstra, 1997. "U.S. Exports, 1972-1994: With State Exports and Other U.S. Data," NBER Working Papers 5990, National Bureau of Economic Research, Inc.
  11. Lafontaine, Francine & Slade, Margaret, 2007. "Vertical Integration and Firm Boundaries : The Evidence," The Warwick Economics Research Paper Series (TWERPS) 799, University of Warwick, Department of Economics.
  12. Dimitra Petropoulou, 2008. "Competing for Contacts: Network Competition, Trade Intermediation and Fragmented Duopoly," CEP Discussion Papers dp0854, Centre for Economic Performance, LSE.
  13. Dimitra Petropoulou, 2008. "Information Costs, Networks and Intermediation in International Trade," CEP Discussion Papers dp0848, Centre for Economic Performance, LSE.
  14. repec:hrv:faseco:4784029 is not listed on IDEAS
  15. Costinot, Arnaud & Antras, Pol, 2010. "Intermediation and Economic Integration," Scholarly Articles 4784026, Harvard University Department of Economics.
  16. Antras, Pol & Helpman, Elhanan, 2004. "Global Sourcing," Scholarly Articles 3196327, Harvard University Department of Economics.
  17. Sebastian Krautheim, 2007. "Export-Supporting FDI," Economics Working Papers ECO2007/24, European University Institute.
  18. 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.
  19. Horstmann, Ignatius J & Markusen, James R, 1996. "Exploring New Markets: Direct Investment, Contractual Relations and the Multinational Enterprise," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 1-19, February.
  20. Jennifer Abel-Koch, 2011. "Firm Size and the Choice of Export Mode," Working Papers 1105, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, revised 29 Mar 2011.
  21. Robert C. Feenstra & John Romalis & Peter K. Schott, 2002. "U.S. Imports, Exports, and Tariff Data, 1989-2001," NBER Working Papers 9387, National Bureau of Economic Research, Inc.
  22. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
  23. Bernardo S. Blum & Sebastian Claro & Ignatius Horstmann, 2010. "Facts and Figures on Intermediated Trade," American Economic Review, American Economic Association, vol. 100(2), pages 419-23, May.
  24. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," NBER Working Papers 10480, National Bureau of Economic Research, Inc.
  25. Daniel F. Spulber, 1996. "Market Microstructure and Intermediation," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 135-152, Summer.
  26. Paul Bergin & Reuven Glick, 2005. "Tradability, Productivity, and Understanding International Economic Integration," Working Papers 514, University of California, Davis, Department of Economics.
  27. Harald Trabold, 2002. "Export Intermediation: An Empirical Test of Peng and Ilinitch," Journal of International Business Studies, Palgrave Macmillan, vol. 33(2), pages 327-344, June.
  28. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-21, September.
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