Learning and the Value of Relationships in International Trade
56 Pages Posted: 9 Mar 2016
Date Written: January 27, 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 first establish several facts: almost half of U.S. imports are in relationships three years or older, relationship survival and traded quantity increase as a relationship ages, and long-term relationships were more resilient in the 2008/9 financial crisis. Based on these findings, we present a model of importer learning and calibrate it using our data. We estimate large differences in the value of relationships across countries. Counterfactuals show that relationships are central to trade flows following external shocks.
Keywords: international trade, firm relationships, learning, institutions
JEL Classification: F11, F14, L14, D22
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