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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
Date of revision:
Publication status: Published in Review of International Economics 4 19(2011): pp. 634-648
Handle: RePEc:lmu:muenar:20574
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  1. Dimitra Petropoulou, 2011. "Information costs, networks and intermediation in international trade," Globalization and Monetary Policy Institute Working Paper 76, Federal Reserve Bank of Dallas.
  2. Antràs, Pol & Costinot, Arnaud, 2010. "Intermediated Trade," CEPR Discussion Papers 7696, C.E.P.R. Discussion Papers.
  3. Pol Antràs & Elhanan Helpman, 2003. "Global Sourcing," NBER Working Papers 10082, National Bureau of Economic Research, Inc.
  4. Ignatius J. Horstmann & James R. Markusen, 1995. "Exploring New Markets: Direct Investment, Contractual Relations and the Multinational Enterprise," NBER Working Papers 5029, National Bureau of Economic Research, Inc.
  5. Pol Antrás & Arnaud Costinot, 2010. "Intermediation and Economic Integration," American Economic Review, American Economic Association, vol. 100(2), pages 424-28, May.
  6. Nathan Nunn, 2005. "Relationship Specificity, Incomplete Contracts and the Pattern of Trade," International Trade 0512018, EconWPA.
  7. 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.
  8. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," NBER Working Papers 10480, National Bureau of Economic Research, Inc.
  9. Pierre-Philippe Combes & Miren Lafourcade & Thierry Mayer, 2005. "The Trade Creating Effects of Business and Social Networks: Evidence from France," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00268768, HAL.
  10. Sebastian Krautheim, 2013. "Export-supporting FDI," Canadian Journal of Economics, Canadian Economics Association, vol. 46(4), pages 1571-1605, November.
  11. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2006. "Trading Partners and Trading Volumes," DEGIT Conference Papers c011_022, DEGIT, Dynamics, Economic Growth, and International Trade.
  12. 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.
  13. Rubinstein, Yona & Helpman, Elhanan & Melitz, Marc, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," Scholarly Articles 3228230, Harvard University Department of Economics.
  14. 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.
  15. Francine Lafontaine & Margaret Slade, 2007. "Vertical Integration and Firm Boundaries: The Evidence," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 629-685, September.
  16. Gabriel J Felbermayr & Benjamin Jung, 2009. "Trade Intermediation and the Organization of Exporters," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 309/2009, Department of Economics, University of Hohenheim, Germany.
  17. 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.
  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. Paul Bergin & Reuven Glick, 2005. "Tradability, Productivity, and Understanding International Economic Integration," Working Papers 514, University of California, Davis, Department of Economics.
  20. 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.
  21. 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.
  22. repec:hrv:faseco:4784029 is not listed on IDEAS
  23. 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.
  24. Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004. "Export versus FDI with Heterogeneous Firms," Scholarly Articles 3229098, Harvard University Department of Economics.
  25. Dimitra Petropoulou, 2008. "Competing for Contacts: Network Competition, Trade Intermediation and Fragmented Duopoly," CEP Discussion Papers dp0854, Centre for Economic Performance, LSE.
  26. 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.
  27. 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.
  28. Daniel F. Spulber, 1996. "Market Microstructure and Intermediation," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 135-152, Summer.
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