A simple model of buyer–seller networks in international trade

Philipp Herkenhoff, Sebastian Krautheim and Philip Sauré

European Economic Review, 2024, vol. 170, issue C

Abstract: The recent literature on firm-to-firm trade has documented salient empirical regularities of the buyer–seller network. We show that surprisingly many of these regularities emerge by superimposing the stochastic balls-and-bins structure of Armenter and Koren (2014) to firms in a classical Krugman (1980) model. Our approach amounts to a re-interpretation of Krugman (1980) and relies on randomized bundling of Krugman-varieties into heterogeneous firms, economically neutral ‘sales units’ that import foreign varieties but belong to local firms, and a statistical reporting threshold that applies to firm-to-firm transactions. We argue that our model provides an important benchmark for the assessment of theoretical models that aim to identify the determinants of firm-to-firm networks.

Keywords: Firm-to-firm; Buyer–seller; Trade; Network; Random matching (search for similar items in EconPapers)
JEL-codes: F10 F12 F14 (search for similar items in EconPapers)
Date: 2024
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Related works:
Working Paper: A Simple Model of Buyer-Seller Networks in International Trade (2021)
Working Paper: A Simple Model of Buyer-Seller Networks in International Trade (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:170:y:2024:i:c:s0014292124001971

DOI: 10.1016/j.euroecorev.2024.104868

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