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Learning and the Value of Relationships in International Trade

Author

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  • Tim Schmidt-Eisenlohr

    (University of Illinois at Urbana-Champaign)

  • Ryan Monarch

    (Federal Reserve Board)

Abstract

We use U.S. import data to explore the characteristics of importer-exporter relationships. While many relationships split up after only one period, others are very persistent. Even when a relationship breakup occurs, importers overwhelmingly replace imports from that partner by buying from a supplier familiar to them. Furthermore, 43% of new product purchases come from firms that the importer interacted with in an earlier year. These results indicate the presence of large matching frictions in international trade. We develop a model to study and quantify the role of reputation and learning in explaining the observed patterns of importer-exporter relationships. Predictions of the model regarding the correlation between switching behavior and source country institutions, the number of export partners, and the number of products purchased are borne out in the data.

Suggested Citation

  • Tim Schmidt-Eisenlohr & Ryan Monarch, 2015. "Learning and the Value of Relationships in International Trade," 2015 Meeting Papers 668, Society for Economic Dynamics.
  • Handle: RePEc:red:sed015:668
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    References listed on IDEAS

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    10. Kamal, Fariha & Sundaram, Asha, 2016. "Buyer–seller relationships in international trade: Do your neighbors matter?," Journal of International Economics, Elsevier, vol. 102(C), pages 128-140.
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    Citations

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    Cited by:

    1. Pawel Krolikowski & Andrew H. McCallum, 2016. "Goods-Market Frictions and International Trade," Working Papers 201635R, Federal Reserve Bank of Cleveland.
    2. Niepmann, Friederike & Schmidt-Eisenlohr, Tim, 2017. "No guarantees, no trade: How banks affect export patterns," Journal of International Economics, Elsevier, vol. 108(C), pages 338-350.
    3. Carballo, Jeronimo & Ottaviano, Gianmarco I.P. & Volpe Martincus, Christian, 2018. "The buyer margins of firms' exports," Journal of International Economics, Elsevier, vol. 112(C), pages 33-49.
    4. Muendler, Marc-Andreas & Rauch, James E., 2018. "Do employee spinoffs learn markets from their parents? Evidence from international trade," European Economic Review, Elsevier, vol. 105(C), pages 159-173.
    5. Alvaro Garcia-Marin & Santiago Justel & Tim Schmidt-Eisenlohr, 2019. "Trade Credit, Markups, and Relationships," CESifo Working Paper Series 7600, CESifo.
    6. Ma, Lin & Ruzic, Dimitrije, 2020. "Globalization and top income shares," Journal of International Economics, Elsevier, vol. 125(C).
    7. Matilde Bombardini & Keith Head & Maria D. Tito & Ruoying Wang, 2020. "How the Breadth and Depth of Import Relationships Affect the Performance of Canadian Manufactures," Working Papers wp2020_2011, CEMFI.
    8. Sebastian Heise, 2016. "Firm-to-Firm Relationships and Price Rigidity - Theory and Evidence," CESifo Working Paper Series 6226, CESifo.
    9. Ryan Monarch, 2014. ""It's Not You, It's Me": Breakup In U.S.-China Trade Relationships," Working Papers 14-08, Center for Economic Studies, U.S. Census Bureau.
    10. Peter S. Eppinger & Nicole Meythaler & Marc-Manuel Sindlinger & Marcel Smolka, 2015. "The Great Trade Collapse and the Spanish Export Miracle: Firm-level Evidence from the Crisis," IAW Discussion Papers 120, Institut für Angewandte Wirtschaftsforschung (IAW).
    11. Peter Schott & Justin Pierce & Georg Schaur & Sebastian Heise, 2017. "Trade Policy Uncertainty and the Structure of Supply Chains," 2017 Meeting Papers 788, Society for Economic Dynamics.

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    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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