Two-Sided Heterogeneity and Trade

Abstract

This paper develops a multi-country model of international trade that provides a simple microfoundation for buyer-seller relationships in trade. We explore a rich dataset that identifies buyers and sellers in trade and establish a set of basic facts that guide the development of the theoretical model. We use predictions of the model to examine the role of buyer heterogeneity in a market for firm-level adjustments to trade shocks, as well as to quantitatively evaluate how firms' marginal costs depend on access to suppliers in foreign markets.

The buyer margins of firms' exports

“…6 Some of our findings concur with those reported by Bernard et al (2013) for Norwegian exporters. 7 Our paper is also related to McCalman (2016) that introduces demand side heterogeneity by relaxing the assumption of homotheticity and therefore allowing expenditure shares to depend on buyers' income levels in addition to relative prices.…”

“…By (13), for a given variety, the buyer range decreases with the proliferation cost ω and the adaptation cost ϑ while it increases with the cutoff cost c D .…”

“…Closer to our paper, Bernard et al (2013) use export information from Norway to study the impact of foreign buyers' size heterogeneity on aggregate trade elasticity. 6 However, differently from our paper, their analysis does not deepen the investigation of the firm-product level and does not cover the distributions of sales across buyers.…”

Buyer–seller relationships in international trade: Do your neighbors matter?

“…We draw upon the networks literature in international trade, namely, Rauch's (1999) "network/search" view of international trade, the idea that the search process in matching international buyers and sellers is "strongly conditioned 3 Increasing availability of trade data identifying both partners in a transaction has resulted in a rich body of work exploring various aspects of buyer-seller relationships in international trade. To name a few, Dragusanu (2014) and Bernard, Moxnes and Ulltveit-Moe (2013) model and provide empirical evidence of assortative matching between exporters and importers in the presence of search costs and trader heterogeneity. Carballo, Ottaviano, and Martincus (2013) document basic characteristics of buyer-seller relationships and develop a model consistent with the findings.…”

Picking cherries or lemons: A unified theory of cross‐border mergers and acquisitions

“…This leads to a Pareto‐like distribution where the market is dominated by a few large exporters. Bernard, Moxnes, and Ulltveit‐Moe () also assume heterogeneity both on the demand side and the supply side. They show the negative assortative matching between exporters and importers: in general, the average connectivity of an importer decreases with the connectivity of the exporter.…”