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Networks versus Markets in International Trade

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  • James E. Rauch

Abstract

I propose a network/search view of international trade in differentiated products. I present evidence that supports the view that proximity and common language/colonial ties are more important for differentiated products than for products traded on organized exchanges in matching international buyers and sellers, and that search barriers to trade are higher for differentiated than for homogeneous products. I also discuss alternative explanations for the findings.

Suggested Citation

  • James E. Rauch, 1996. "Networks versus Markets in International Trade," NBER Working Papers 5617, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:5617
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    1. Hahn, F H, 1971. "Equilibrium with Transaction Costs," Econometrica, Econometric Society, vol. 39(3), pages 417-439, May.
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    9. Gould, David M, 1994. "Immigrant Links to the Home Country: Empirical Implications for U.S. Bilateral Trade Flows," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 302-316, May.
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    13. Egan, Mary Lou & Mody, Ashoka, 1992. "Buyer-seller links in export development," World Development, Elsevier, vol. 20(3), pages 321-334, March.
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    JEL classification:

    • F10 - International Economics - - Trade - - - General

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