Selling Ability in Export Market

This study is motivated by two contradictory observations. The first is that indirect exporters and carry-along exporters share the same productivity distribution. While indi- rect exporters export through trade intermediaries, carry-along exporters not only export their own goods, but also carry goods for other indirect exporters. The second is that direct exporters that have the highest average productivity only export their own goods without carrying goods for others. To rationalize these two observations, we propose a determinant we term “selling ability.” We first establish a heterogeneous firm model with two-dimensional heterogeneities: production ability (productivity) and selling ability. We then show evidence of selling ability that is consistent with the model implications. Based on the model, we also investigate a policy of the elimination of the direct trade rights restriction in China and find evidence consistent with the model predictions.