Risk and Cost Sharing in Firm-to-Firm Trade

Cristina Herghelegiu () and Evgenii Monastyrenko ()
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Cristina Herghelegiu: ECARES, Université Libre de Bruxelles, B
Evgenii Monastyrenko: Department of Economics and Management, Université du Luxembourg

DEM Discussion Paper Series from Department of Economics at the University of Luxembourg

Abstract: (To consult this DP, please send an e-mail to dem@uni.lu) Firms are exposed to important risks and costs when trading across borders. Based on a set of standardized rules known as Incoterms, firms decide ex ante how to delimit their responsibilities throughout the shipping process to reduce the inherent contractual frictions. This paper investigates how sellers and buyers share risks and costs in international trade transactions depending on the characteristics of the exchanged product. We rely on a highly detailed dataset involving all Russian exporters and their foreign customers during 2012-2015. Our results suggest that buyers are more likely to bear responsibilities for goods that are (a) more distant from final use and (b) less tailored to their specific needs. These results are reinforced for products that constitute important inputs for buyers but reversed when there is a positive difference between the buyer and the seller size.

Keywords: Risks; Costs; Incoterms; Firms Exports. (search for similar items in EconPapers)
JEL-codes: D22 D23 F14 L11 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-bec, nep-cis, nep-cwa, nep-int and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:luc:wpaper:20-24

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