Trade intermediation and the organization of exporters

Gabriel Felbermayr and Benjamin Jung

No 331, Tübinger Diskussionsbeiträge from University of Tübingen, School of Business and Economics

Abstract: 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.

Keywords: Trade intermediation; international trade; heterogeneous firms; incomplete contracts (search for similar items in EconPapers)
JEL-codes: F12 F23 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-int and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (77)

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Related works:
Journal Article: Trade Intermediation and the Organization of Exporters (2011)
Working Paper: Trade intermediation and the organization of exporters (2011)
Working Paper: Trade Intermediation and the Organization of Exporters (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tuedps:331

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