Search Frictions in International Good Markets

Isabelle Mejean, Clemence Lenoir and Julien Martin

No 13442, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper studies how search frictions in international good markets can distort competition between firms of heterogeneous productivity. We add bilateral search frictions between buyers and sellers in a Ricardian model of trade. Search frictions prevent buyers from identifying the most productive sellers which induces competitive distortions and benefits low-productivity firms at the expense of high-productivity ones. We use French firm-to-firm trade data and a GMM estimator to recover search frictions faced by French exporters at the product and destination level. They are found more severe in large and distant countries and for products that are more differentiated. In a counterfactual exercise, we show that reducing the level of search frictions leads to an improvement in the efficiency of the selection process because the least productive exporters are pushed out of the market while the export probability and the conditional value of exports increase at the top of the productivity distribution. As a consequence, the mean productivity of exporters increases significantly.

Keywords: Firm-to-firm trade; Search frictions; Ricardian trade model; Structural estimation (search for similar items in EconPapers)
JEL-codes: F10 F11 F14 L15 (search for similar items in EconPapers)
Date: 2019-01
New Economics Papers: this item is included in nep-bec and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Search Frictions in International Goods Markets (2023)
Working Paper: Search Frictions in International Goods Markets (2022)
Working Paper: Search Frictions in International Goods Markets (2022)
Working Paper: Search Frictions in International Goods Markets (2022)
Working Paper: Search Frictions in International Goods Markets (2022)
Working Paper: Search Frictions in International Goods Markets (2022)
Working Paper: Search Frictions in International Good Markets (2018)
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