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Networks versus Markets in International Trade

  • James E. Rauch

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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5617.

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Date of creation: Jun 1996
Date of revision:
Publication status: published as "Networks Versus Markets in International Trade," Journal of International Economics, Vol. 48 (June 1999): 7-35.
Handle: RePEc:nbr:nberwo:5617
Note: ITI
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  1. Eaton Jonathan & Tamura Akiko, 1994. "Bilateralism and Regionalism in Japanese and U.S. Trade and Direct Foreign Investment Patterns," Journal of the Japanese and International Economies, Elsevier, vol. 8(4), pages 478-510, December.
  2. Deardorff, A.V., 1995. "Determinants of Bilateral Trade : Does Gravity Work in a Neoclassical World?," Papers 95-05, Michigan - Center for Research on Economic & Social Theory.
  3. Jeffrey A. Frankel & Ernesto Stein & Shang-Jin Wei, 1993. "Continental Trading Blocs: Are They Natural, or Super-Natural?," NBER Working Papers 4588, National Bureau of Economic Research, Inc.
  4. Helpman, Elhanan, 1987. "Imperfect competition and international trade: Evidence from fourteen industrial countries," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 62-81, March.
  5. 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 302-16, May.
  6. Hummels, D. & Levinsohn, J., 1993. "Monopolistic Competition and International Trade: Reconsidering the Evidence," Working Papers 339, Research Seminar in International Economics, University of Michigan.
  7. Leamer, Edward E., 1993. "U.S. manufacturing and an emerging Mexico," The North American Journal of Economics and Finance, Elsevier, vol. 4(1), pages 51-89.
  8. Rozanski, Jerzy & Yeats, Alexander, 1994. "On the (in)accuracy of economic observations: An assessment of trends in the reliability of international trade statistics," Journal of Development Economics, Elsevier, vol. 44(1), pages 103-130, June.
  9. Harrigan, James, 1994. "Scale Economies and the Volume of Trade," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 321-28, May.
  10. James E. Rauch, 1996. "Trade and Search: Social Capital, Sogo Shosha, and Spillovers," NBER Working Papers 5618, National Bureau of Economic Research, Inc.
  11. Hahn, F H, 1971. "Equilibrium with Transaction Costs," Econometrica, Econometric Society, vol. 39(3), pages 417-39, May.
  12. Egan, Mary Lou & Mody, Ashoka, 1992. "Buyer-seller links in export development," World Development, Elsevier, vol. 20(3), pages 321-334, March.
  13. Keith Head & John Ries, 1998. "Immigration and Trade Creation: Econometric Evidence from Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 47-62, February.
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