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A Search Cost Perspective on Duration of Trade

More than half of all US import relationships begin with less than $10,000 annually. The median relationship is observed to last just one year. The incidence and duration of these relationships are consistent with a matching model of international trade. The preponderance of small starting relationships reveals uncertainty present in formation of trade relationships. Initial size, reliability, and search costs matter and play an important role. Larger initial purchase results in longer relationships. Higher reliability and lower search costs lead to larger initial purchases and longer relationships.

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Paper provided by Department of Economics, Louisiana State University in its series Departmental Working Papers with number 2006-12.

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Handle: RePEc:lsu:lsuwpp:2006-12
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  1. Andrew B. Bernard & J. Bradford Jensen, 2001. "Why Some Firms Export," NBER Working Papers 8349, National Bureau of Economic Research, Inc.
  2. repec:oup:qjecon:v:126:y:2011:i:1:p:417-474 is not listed on IDEAS
  3. David E. Weinstein & Christian Broda, 2004. "Globalization And The Gains From Variety," Econometric Society 2004 Latin American Meetings 327, Econometric Society.
  4. James E. Rauch & Joel Watson, 1999. "Starting Small in an Unfamiliar Environment," NBER Working Papers 7053, National Bureau of Economic Research, Inc.
  5. Juan Carlos Hallak & Peter K. Schott, 2008. "Estimating Cross-Country Differences in Product Quality," NBER Working Papers 13807, National Bureau of Economic Research, Inc.
  6. repec:tpr:qjecon:v:119:y:2004:i:2:p:646-677 is not listed on IDEAS
  7. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-64, September.
  8. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
  9. repec:rus:hseeco:121669 is not listed on IDEAS
  10. Besedes, Tibor & Prusa, Thomas J., 2006. "Product differentiation and duration of US import trade," Journal of International Economics, Elsevier, vol. 70(2), pages 339-358, December.
  11. David Hummels & Volodymyr Lugovskyy, 2006. "Are Matched Partner Trade Statistics a Usable Measure of Transportation Costs?," Review of International Economics, Wiley Blackwell, vol. 14(1), pages 69-86, 02.
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