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Trade intermediation and the organization of exporters

  • Felbermayr, Gabriel J.
  • Jung, Benjamin

The business literature and recent descriptive evidence show that exporting firms typically require the help of foreign trade intermediaries or need to set up own foreign wholesale affiliates. In contrast, conventional trade theory models assume that producers can directly access foreign consumers. This paper introduces intermediaries in an international trade model where producers differ with respect to productivity as well as regarding their varieties' perceived quality and tradability. We assume that trade intermediation is prone to frictions due to the absence of enforceable cross-country contracts while own wholesale subsidiaries require capital investment. We derive the sorting pattern of firms according to their degree of competitive advantage and show how the relative prevalence of intermediation depends on the degree of heterogeneity among producers, on the importance of market-specificity of goods, or on expropriation risk. We use US export data for 50 sectors and 133 destination countries to check the empirical validity of this predictions and find robust empirical support.

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Paper provided by University of Tübingen, School of Business and Economics in its series Tübinger Diskussionsbeiträge with number 331.

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Date of creation: 2011
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Handle: RePEc:zbw:tuedps:331
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  1. Gabriel J Felbermayr & Benjamin Jung, 2009. "Trade Intermediation and the Organization of Exporters," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 309/2009, Department of Economics, University of Hohenheim, Germany.
  2. Romain Aeberhardt & Ines Buono & Harald Fadinger, 2009. "Learning, Incomplete Contracts and Ecport Dynamics: Theory and Evidence from French Firms," Vienna Economics Papers 1006, University of Vienna, Department of Economics.
  3. Gene M. Grossman & Elhanan Helpman, 2002. "Integration Versus Outsourcing In Industry Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 85-120, February.
  4. Pol Antras & Elhanan Helpman, 2003. "Global Sourcing," Harvard Institute of Economic Research Working Papers 2005, Harvard - Institute of Economic Research.
  5. Antras, Pol & Costinot, Arnaud, 2011. "Intermediated Trade," Scholarly Articles 4784024, Harvard University Department of Economics.
  6. Nathan Nunn, 2005. "Relationship Specificity, Incomplete Contracts and the Pattern of Trade," International Trade 0512018, EconWPA.
  7. Ahn, JaeBin & Khandelwal, Amit K. & Wei, Shang-Jin, 2011. "The role of intermediaries in facilitating trade," Journal of International Economics, Elsevier, vol. 84(1), pages 73-85, May.
  8. Robert C. Feenstra & John Romalis & Peter K. Schott, 2002. "U.S. Imports, Exports, and Tariff Data, 1989-2001," NBER Working Papers 9387, National Bureau of Economic Research, Inc.
  9. Paul R. Bergin & Reuven Glick, 2005. "Tradability, Productivity, and Understanding International Economic Integration," NBER Working Papers 11637, National Bureau of Economic Research, Inc.
  10. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," The Quarterly Journal of Economics, MIT Press, vol. 123(2), pages 441-487, 05.
  11. Pol Antràs & Arnaud Costinot, 2010. "Intermediation and Economic Integration," NBER Working Papers 15751, National Bureau of Economic Research, Inc.
  12. Robert C. Feenstra, 1997. "U.S. Exports, 1972-1994: With State Exports and Other U.S. Data," NBER Working Papers 5990, National Bureau of Economic Research, Inc.
  13. Ignatius J. Horstmann & James R. Markusen, 1995. "Exploring New Markets: Direct Investment, Contractual Relations and the Multinational Enterprise," NBER Working Papers 5029, National Bureau of Economic Research, Inc.
  14. Francine Lafontaine & Margaret Slade, 2007. "Vertical Integration and Firm Boundaries: The Evidence," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 629-685, September.
  15. Daniel F. Spulber, 1996. "Market Microstructure and Intermediation," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 135-152, Summer.
  16. Dimitra Petropoulou, 2007. "Competing for Contacts: Network Competition, Trade Intermediation and Fragmented Duopoly," Economics Series Working Papers 371, University of Oxford, Department of Economics.
  17. Sebastian Krautheim, 2013. "Export-supporting FDI," Canadian Journal of Economics, Canadian Economics Association, vol. 46(4), pages 1571-1605, November.
  18. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
  19. Akerman, Anders, 2010. "A Theory on the Role of Wholesalers in International Trade based on Economies of Scope," Research Papers in Economics 2010:1, Stockholm University, Department of Economics.
  20. Harald Trabold, 2002. "Export Intermediation: An Empirical Test of Peng and Ilinitch," Journal of International Business Studies, Palgrave Macmillan, vol. 33(2), pages 327-344, June.
  21. Dimitra Petropoulou, 2008. "Information Costs, Networks and Intermediation in International Trade," CEP Discussion Papers dp0848, Centre for Economic Performance, LSE.
  22. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," NBER Working Papers 10480, National Bureau of Economic Research, Inc.
  23. repec:hrv:faseco:4784029 is not listed on IDEAS
  24. repec:hal:cesptp:hal-00268768 is not listed on IDEAS
  25. Bernardo S. Blum & Sebastian Claro & Ignatius Horstmann, 2010. "Facts and Figures on Intermediated Trade," American Economic Review, American Economic Association, vol. 100(2), pages 419-23, May.
  26. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2006. "Trading Partners and Trading Volumes," DEGIT Conference Papers c011_022, DEGIT, Dynamics, Economic Growth, and International Trade.
  27. Combes, Pierre-Philippe & Lafourcade, Miren & Mayer, Thierry, 2005. "The trade-creating effects of business and social networks: evidence from France," Journal of International Economics, Elsevier, vol. 66(1), pages 1-29, May.
  28. Jennifer Abel-Koch, 2011. "Firm Size and the Choice of Export Mode," Working Papers 1105, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, revised 29 Mar 2011.
  29. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-21, September.
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