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Trade intermediation and the organization of exporters

  • Felbermayr, Gabriel
  • Jung, Benjamin

Empirical papers show that successful exporting firms either use unaffiliated foreign trade intermediaries or own foreign wholesale subsidiaries. However, conventional trade theory models assume that producers can directly access foreign consumers. We introduce intermediaries in an international trade model where producers differ with respect to productivity as well as regarding their varieties’ perceived quality and tradability. Trade intermediation is prone to frictions owing to the absence of enforceable cross-country contracts while own wholesale subsidiaries require additional capital investment. The sorting pattern of firms depends on their degree of competitive advantage; the equilibrium prevalence of intermediation in the industry depends negatively on the heterogeneity among producers, and the market-specificity of goods, and positively on expropriation risk. Using sectoral US export data by destination country, we confirm the empirical validity of these predictions.

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Paper provided by University of Munich, Department of Economics in its series Munich Reprints in Economics with number 20574.

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Date of creation: 2011
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Publication status: Published in Review of International Economics 4 19(2011): pp. 634-648
Handle: RePEc:lmu:muenar:20574
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  10. Felbermayr, Gabriel J. & Jung, Benjamin, 2011. "Trade intermediation and the organization of exporters," Tübinger Diskussionsbeiträge 331, University of Tübingen, School of Business and Economics.
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  19. Felbermayr, Gabriel & Jung, Benjamin, 2011. "Trade intermediation and the organization of exporters," Munich Reprints in Economics 20574, University of Munich, Department of Economics.
  20. Pol Antras & Elhanan Helpman, 2003. "Global Sourcing," Harvard Institute of Economic Research Working Papers 2005, Harvard - Institute of Economic Research.
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  25. 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.
  26. 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.
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  28. Dimitra Petropoulou, 2008. "Competing for Contacts: Network Competition, Trade Intermediation and Fragmented Duopoly," CEP Discussion Papers dp0854, Centre for Economic Performance, LSE.
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