Learning, Incomplete Contracts and Export Dynamics: Theory and Evidence from French Firms

R. Aeberhardt, Ines Buono and Harald Fadinger
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R. Aeberhardt: Insee

Documents de Travail de l'Insee - INSEE Working Papers from Institut National de la Statistique et des Etudes Economiques

Abstract: We consider a model where exporting requires finding a local partner in each market. Contracts are incomplete and exporters must learn the reliability of their partners through experience. In the model, export behavior is state-dependent due to matching frictions, although there are no sunk costs. Better legal institutions alleviate contracting frictions especially in sectors with large contracting problems. Thus, measures of legal quality help reduce the risk that a match between an exporter and a local distributor splits, and they are all the more effective in sectors that are more exposed to hold-up problems. Moreover, the breaking risk declines with the age of the relationship, as unreliable partners are weeded out. We find strong evidence in favor of the model's predictions when testing them with a French dataset that includes information on firm-level exports by destination country.

Keywords: Trade Dynamics; Learning; Incomplete Contracts; State dependence; Firm-level Trade Data (search for similar items in EconPapers)
JEL-codes: F12 F14 L14 (search for similar items in EconPapers)
Date: 2011
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https://www.bnsp.insee.fr/ark:/12148/bc6p06zr3mp/f1.pdf Document de travail de la DESE numéro G2011-16 (application/pdf)

Related works:
Journal Article: Learning, incomplete contracts and export dynamics: Theory and evidence from French firms (2014)
Working Paper: Learning, incomplete contracts and export dynamics: theory and evidence from French firms (2012)
Working Paper: Learning, Incomplete Contracts and Ecport Dynamics: Theory and Evidence from French Firms (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:nse:doctra:g2011-16

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