A Search Cost Perspective on Formation and Duration of Trade

Besedeš, Tibor

doi:10.1111/j.1467-9396.2008.00752.x

Cited by 94 publications

(105 citation statements)

References 19 publications

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“…Furthermore, the findings of this paper can be considered in relation to those of a series of studies by Besedeš and Prusa (2006b) and Besedeš (2008) on the duration of the US imports of differentiated products. Besedeš and Prusa (2006b) foot-loose investments, once the production networks are created, trade relationships are rather stable due to the relation-specific nature of transactions.…”

Section: Robustness Checkmentioning

confidence: 99%

“…As their companion paper, Besedeš and Prusa (2006b) highlight that differentiated products have a longer median duration and a higher probability of survival than homogeneous products, based on a search cost model of international trade. Besedeš (2008) provides additional facts on the survival of the US imports from a search cost perspective. The prevalence of short-lived trade relationships has been also found in just a few studies including Nitch (2007) for German imports and Blyde (2008) for the exports from Latin American countries.…”

Section: These Two Features Of the Transactions Of Intermediate Goodsmentioning

confidence: 99%

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Stability of production networks in East Asia: Duration and survival of trade

Obashi

2010

Japan and the World Economy

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This paper sheds light on the stability of international production networks in East Asia from the perspective of the duration and survival of bilateral trade relationships at the product-line level. Using highly disaggregated data for intra-East Asian machinery trade, survival analysis is conducted as well as the examinations of the duration and volatility of trade relationships. The product-level analyses reveal that, compared to machinery finished products, machinery parts & components are traded through longer-lived and more stable relationships among East Asian countries. Once transactions are started, trade relationships of machinery parts & components are more likely to be maintained between countries even at a long distance, regardless of the exchange-rate fluctuations. The probability of discontinuing trade relationships of machinery finished products, on the other hand, are more likely to be sensitive to the level of trading cost as well as the exchange-rate fluctuations.

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Section: Robustness Checkmentioning

confidence: 99%

Section: These Two Features Of the Transactions Of Intermediate Goodsmentioning

confidence: 99%

Stability of production networks in East Asia: Duration and survival of trade

Obashi

2010

Japan and the World Economy

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“…This theory does not, however, seem to be consistent with very short trade durations (see Besedeš and Prusa, 2006a, for a discussion). The search-cost theory proposed by Rauch and Watson (2003) is another candidate, and it has been shown by Besedeš and Prusa (2006b) and Besedeš (2008) to have some explanatory power. However, the most natural setting for thinking about entry and exit in the export market may be the literature on sunk costs.…”

Section: Other Relevant Researchmentioning

confidence: 99%

“…They also find that, within each product type, the larger the initial value of the trade flow, the longer the duration. Besedeš (2008) builds on this work, and investigates further the implications of the model by Rauch and Watson (2003). Nitsch (2009) examines the duration of German imports at the 8-digit (Combined Nomenclature) product level, using data from Eurostat for 1995-2005.…”

Section: Empirical Papers On the Duration Of Tradementioning

confidence: 99%

Exploring the duration of EU imports

2011

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The objective of this paper is twofold. First, against the background of an existing empirical literature on the duration of trade which has found that international trade is often of strikingly short duration, we aim to establish whether or not EU imports from the rest of the world also are short-lived. Second, since there is at this point no clear commonly accepted theoretical explanation for these short trade durations, we seek to provide a thorough empirical description and analysis of the phenomenon, with the intention of thereby facilitating theoretical developments on the subject. We employ a rich data set of detailed imports to the EU15 countries from 140 exporters, covering the time period 1962-2006. Using these data, we begin by conducting a thorough descriptive analysis of the duration of EU imports. Thereafter, we perform a regression analysis using discrete-time duration models with proper controls for unobserved heterogeneity. We draw the conclusion that EU imports are indeed very short-lived -in fact, possibly more so than, for example, US imports. The median duration of EU imports is for example merely one year, and almost 60 percent of all spells cease during the first year of service. Among our empirical findings are (i) that the duration of trade remains stable across the long time period that we study; (ii) that short trade durations are the result of at least two processes: countries shifting between different suppliers but continuing to import a given product, and countries ceasing to import the product altogether; and (iii) that countries with a diversified export structure also will tend to have more long-lived export flows. In our formal regression, we are also able to find a set of explanatory variables that have statistically significant effects on the probability that trade flows die. Terms of use: Documents in

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“…In a series of recent papers Besedeš (2007) and Besedeš andPrusa (2006a, 2006b) (hereafter BP) provide studies of the duration of bilateral trade relationships at the product and industry level in the U.S. import market between 1972 and 2001. These papers contain a number of interesting and somewhat surprising findings.…”

Section: Introductionmentioning

confidence: 99%

Transient products but persistent trade patterns

Cassing

Husted²

2009

Journal of Economic Studies

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We have combined our findings of widespread bilateral trade-share persistence with some recent empirical evidence of substantial and rapid volatility in the country source of most products in order to extend the implications of this literature in several ways. In particular, we are able to infer that countries are frequently switching to very different products in their export bundles to particular destinations. We also argue that the evidence of rapid product turnover in trade is not inconsistent with traditional factor endowment trade pattern predictions, as has been inferred in the literature. Finally we find that sunk costs in international trade appear to be external to particular products going to particular destinations but internal to the sum total of bilateral trade.JEL codes: F14, F17

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A Search Cost Perspective on Formation and Duration of Trade

Cited by 94 publications

References 19 publications

Stability of production networks in East Asia: Duration and survival of trade

Stability of production networks in East Asia: Duration and survival of trade

Exploring the duration of EU imports

Transient products but persistent trade patterns

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