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Pass-on Trade: Why do Firms Simultaneously engage in Two-Way Trade in the Same Varieties?

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  • Jože P. Damijan
  • Jozef Konings
  • Sašo Polanec

Abstract

This paper documents that a large fraction of trade flows at the firm level consists of simultaneous imports and exports in identical products, narrowly defined at the 8-digit product classification, which we call Pass-On Trade, POT. We use data on imports and exports at the firm–product level for Slovenian manufacturing firms in the period 1994-2008, to show that, on average, 70 percent of all exporting firms engage in POT. This corresponds to more than 50 percent of all exported products. Thus, imported products that are exported again by the same firm is a statistical regularity of trade of Slovenian manufacturing firms. We document that the use of POT is increasing in firm size, product diversification, multinational status as well as firm productivity and profitability. We offer and explore empirically a number of explanations for POT. Among possible explanations, we find evidence on the importance of firms’ multinational networks and demand complementarities between firms’ own and POT products. The latter confirms the theoretical explanations for ‘Carry-Along Trade’ (CAT) as developed by the recent work of Bernard et al (2010, 2012).

Suggested Citation

  • Jože P. Damijan & Jozef Konings & Sašo Polanec, 2012. "Pass-on Trade: Why do Firms Simultaneously engage in Two-Way Trade in the Same Varieties?," LICOS Discussion Papers 31212, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  • Handle: RePEc:lic:licosd:31212
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    References listed on IDEAS

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    Cited by:

    1. Stefaan Decramer & Catherine Fuss & Jozef Konings, 2016. "How Do Exporters React to Changes in Cost Competitiveness?," The World Economy, Wiley Blackwell, vol. 39(10), pages 1558-1583, October.
    2. Joachim Wagner, 2016. "A survey of empirical studies using transaction level data on exports and imports," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(1), pages 215-225, February.
    3. Jože Damijan & Črt Kostevc & Matija Rojec, "undated". "FDI, structural change and productivity growth: global supply chains at work in Central and Eastern European countries," IRMO Occasional Papers 3, Institute for Development and International Relations, Zagreb.
    4. João Amador & Sónia Cabral, 2014. "Global Value Chains: Surveying Drivers, Measures and Impacts," Working Papers w201403, Banco de Portugal, Economics and Research Department.
    5. Jože Damijan & Črt Kostevc & Matija Rojec, 2013. "Global Supply Chains at Work in Central and Eastern European Countries:Impact of FDI on export restructuring and productivity growth," Working Papers VIVES Research Centre for Regional Economics 37, KU Leuven, Faculty of Economics and Business, VIVES Research Centre for Regional Economics.
    6. Eugene Beaulieu & Shan Wan, "undated". "International Technology Diffusion via Goods Trade: Theory and Evidence from China," Working Papers 2016-38, Department of Economics, University of Calgary, revised 12 Aug 2016.
    7. repec:rfe:zbefri:v:35:y:2017:i:1:p:45-71 is not listed on IDEAS

    More about this item

    Keywords

    pass-on trade; multi-product firms; two-way trade;

    JEL classification:

    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

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