Friday January 10, 2014
3:15PM - 4:45PM
FELIPE BENGURIA, University of Virginia
Production and Distribution in International Trade: Evidence from Matched Exporter-Importer Data
This paper develops a general equilibrium model of international trade with heterogeneous exporters and heterogeneous importers. This theory is guided by new findings drawn from a matched exporter-importer dataset that characterizes the relationships between exporting and importing firms. I find that most exporters have a single importing partner, that highly productive exporters tend to trade with highly productive importers, and that the value traded is positively correlated with both exporter and importer productivities. The model analyzes the selection of exporters and importers into trading pairs and features simultaneous free entry into exporting and into importing. This theory provides a rationale for the fixed costs of entering export markets, associating them with the costs of searching for importing firms that distribute a product to final consumers abroad. The model is used to derive the implications of the matching and sorting of exporters and importers for global trade flows across sectors and destinations. I estimate the parameters of the model, including the search costs that govern the sorting of exporters and importers. I use the estimated parameters to study the effects of a trade liberalization. I compare these results to the response of exporting and importing firms to the recent Colombia-U.S. free trade agreement.