Learning and the Value of Trade Relationships
53 Pages Posted: 15 Apr 2015 Last revised: 2 Mar 2016
Date Written: February 29, 2016
How valuable are long-term supplier relationships? To address this question, this paper explores relationships between U.S. importers and their suppliers abroad. We establish several facts: almost half of U.S. imports involve relationships three years or older, relationship survival and traded quantity increase as a relationship ages, and long-term relationships were more resilient in the 2008-09 financial crisis. We present a model of importer learning and calibrate it to detailed panel data on U.S. importer relationships. Model estimates imply large differences in the value of relationships across countries. Counterfactuals show that relationship-level responses to shocks are central to aggregate trade dynamics.
Keywords: International Trade, Firm Relationships, Learning, Institutions
JEL Classification: F11, F14, L14, D22
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