A theory on the role of wholesalers in international trade based on economies of scope

Abstract

Abstract. This paper offers a theoretical foundation for the existence of wholesalers and other intermediaries in international trade and analyzes their role in an economy with heterogeneous manufacturing firms and fixed costs of exporting. Wholesalers are assumed to possess a technology such that they can buy manufacturing goods domestically and sell in foreign markets and they can, unlike manufacturers, export more than one good. A wholesaler therefore faces an additional fixed cost, which increases in the number of goods it handles. The presence of wholesale firms leads to productivity sorting. The most productive firms export on their own by paying a fixed cost, but a range of firms with intermediate productivity levels export through international wholesalers. A higher fixed cost of exporting to a destination means that wholesalers handle: (i) a higher share of total export volumes to this destination and (ii) a higher share of the exported product scope (i.e., the number of exported products) to this destination. A higher fixed cost of exporting gives wholesalers a larger role, since these can spread the fixed cost across more than one good. The wholesale technology therefore exhibits economies of scope. An empirical analysis using Swedish firm-level data supports the main assumption and predictions of the model. Résumé. Une théorie du rôle des grossistes dans le commerce international Wholesalers in international trade 157telle qu'ils peuvent acheter des biens manufacturiers dans uneéconomie nationale et les vendreà l'étranger, et peuvent, ce qui n'est pas nécessairement le cas pour les manufacturiers, exporter plus qu'un bien. Un grossiste fait donc faceà un coût fixe additionnelà proportion que le nombre de biens dont on s'occupe s'accroît. La présence des firmes grossistes mèneà un départage des producteurs selon leur productivité. Les producteurs les plus productifs s'occupent eux-mêmes de leurs exportations en déboursant un coût fixe, mais unéventail de producteursà productivité intermédiaire va exporter par le truchement de grossistes internationaux. Un coût fixe plusélevé de l'exportation vers une destination donnée veut dire que les grossistes s'occupent (i) d'une portion plus grande du volume total des exportations vers cette destination, et (ii) d'une portion plus grande de la portée de produits exportés (i.e., du nombre de produits exportés) vers cette destination. Un coût fixe plusélevé de l'exportation donne aux grossistes un rôle plus important puisqu'ils peuventétaler ce coût fixe sur plus qu'un produit. La technologie du commerce en gros bénéficie donc d'économies de portée. Une analyse empirique utilisant des données suédoises au niveau de la firme confirme le postulat de base de ce modèle et ses prédictions.

Intermediaries, Firm Heterogeneity and Exporting Behaviour

“…() compare the exporting behaviour of intermediaries and producers who directly export to international markets, and find that in the context of China, the share of exports by intermediaries to an international market is bigger when that market is more distant, smaller, or has more regulatory barriers to trade. Similar results are also found for the case of Sweden (Akerman, ). Meanwhile, Bernard et al.…”

“…This implies that if any firm has any exporting, it should be done through intermediaries, which again contradicts with the empirical evidence reported in the literature (e.g. Akerman, 2010;Ahn et al, 2011). In other words, this type of cost structure is not widely used in reality, either.…”

“…In China, at least 22 and 18 per cent of its exports and imports, respectively, in 2005 flew through intermediaries (Ahn et al., ). In Sweden, about 15 per cent of export came through intermediaries in 2005 (Akerman, ).…”

Exporters in cross‐section: Direct versus intermediated trade

“… For more on the technology used by trade intermediaries (wholesalers), see Akerman (), which argues that the technology exhibits economies of scope.…”

Market Entry Mode: Evidence From the Golden Age of Hollywood

“…See Ahn, Khandelwal, and Wei (), Akerman (), Bernard, Grazzi, and Tomasi (), Blum, Claro, and Horstmann (), Bernard et al (), and Dasgupta and Mondria ().…”