Diversification in the Small and in the Large: Evidence from Trade Networks

Francis Kramarz (), Isabelle Mejean and Julien Martin

No 663, 2014 Meeting Papers from Society for Economic Dynamics

Abstract: We study the extent to which the structure of an exporter's portfolio of buyers affects the volatility of its sales, volatility of bilateral exports. In our model, diversifying sales across a larger number of partners reduces the firm's exposure to idiosyncratic demand shocks, thus the volatility of its sales. Being connected with importers that also interact with other sellers creates comovements in sales across sellers. We show that both elements can generate "granular" fluctuations in aggregate exports. Based on highly detailed export data, we show that exporters are little diversified in sales and that trade networks are highly connected across exporters. This participates to explaining the high volatility of bilateral exports in our data.

Date: 2014
New Economics Papers: this item is included in nep-int and nep-net
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