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Community Networks and Trade

Author

Listed:
  • Boken, Johannes

    (University of Warwick)

  • Gadenne, Lucie

    (Queen Mary University of London, Institute for Fiscal Studies and CEPR.)

  • Nandi, Tushar

    (IISER Kolkata)

  • Santamaria. Marta

    (University of Warwick)

Abstract
Do community networks shape firm-to-firm trade in emerging economies? We study the role of communities in facilitating firm-to-firm trade and firm outcomes using data on firm-to-firm transactions and firm owners’ community (castes) affiliations for the universe of medium- and large- sized firms in West Bengal, India. We find that firms are substantially more likely to trade, and trade more, with firms from their own caste. Studying the mechanisms underlying this effect, we find evidence consistent both with castes alleviating trade frictions and taste-based discrimination by firms against those outside their community. Guided by these stylized facts, we develop a model of firmto- firm trade in which communities affect pair productivity and matching costs and estimate the model using our reduced-form estimates. A counterfactual extending the positive effects of castes on trade to all potential supplier-client pairs would increase the number of network links by 60% and increase average firm-to-firm sales by 20%.

Suggested Citation

  • Boken, Johannes & Gadenne, Lucie & Nandi, Tushar & Santamaria. Marta, 2022. "Community Networks and Trade," The Warwick Economics Research Paper Series (TWERPS) 1442, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:1442
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    References listed on IDEAS

    as
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