Trade Intermediation and the Organization of Exporters

Gabriel Felbermayr and Benjamin Jung

No 309/2009, Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim from Department of Economics, University of Hohenheim, Germany

Abstract: The business literature shows that exporting firms typically require the help of foreign trade intermediaries or need to set up own foreign wholesale affiliates. In contrast, conventional trade theory models assume that producers can directly access foreign consumers. This paper models the endogenous emergence of intermediaries in an international trade model where producers differ with respect to productivity as well as regarding their varieties' perceived quality and tradability. We assume that trade intermediation is prone to frictions due to the absence of enorceable cross-country contracts while own wholesale subsidiaries require capital investment. We derive the sorting pattern of firms according to their degree of competitive advantage and show how the relative prevalence of intermediation depends on the degree of heterogeneity among producers, on the importance of market-specificity of goods, or on expropriation risk. We use US export data for 50 sectors and 133 destination countries to check the empirical validity of this predictions and find robust empirical support. JEL classifcation: F12, F23

Keywords: Trade intermediation; international trade; heterogeneous rms; incomplete contracts. (search for similar items in EconPapers)
Pages: 35 pages
Date: 2009-04
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Related works:
Journal Article: Trade Intermediation and the Organization of Exporters (2011)
Working Paper: Trade intermediation and the organization of exporters (2011)
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