Exporters in cross‐section: Direct versus intermediated trade. Issue 1 (3rd August 2017)

• Record Type: Journal Article
• Authors: Wang, Qianqian; Gibson, Mark J.
• Is Part Of: Review of international economics. Volume 26:Issue 1(2018)
• Page Start: 84
• Page End: 95
• Publication Date: 2017-08-03
• Subjects: International economic relations -- Periodicals; International finance -- Periodicals; Economic policy -- Periodicals; 330
• DOI: 10.1111/roie.12304
• Languages: English
• ISSNs: 0965-7576

Abstract

Abstract: How do producers that export their goods directly differ from those that export through trade intermediaries? We take a standard model of trade with heterogeneous firms and add heterogeneity in quality to the usual heterogeneity in productivity. Modeling trade intermediaries as increasing marginal costs but decreasing fixed costs of exporting, we find that only firms with the highest quality‐adjusted productivity levels choose to export directly. Under certain parameter restrictions, the model shows that direct exporters tend to be larger and charge higher prices for their goods. In contrast to the literature, using Chinese customs data, we confirm that direct exporters do charge higher prices for their goods.