Exporters in cross‐section: Direct versus intermediated trade

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. * These authors contributed equally to this work.

Taste renaissance, tax reform, and industrial organization of the beer industry

“…That is, firms that produce higher‐quality beer incur larger , and smaller firms produce higher‐quality beer with , where we assume that ψ > 0 and φ < 0 reflect the negative scope for quality, 20 as indicated in the regression results in Table 1. Thus, as in Baldwin and Harrigan (2011) and Wang and Gibson (2018), quality depends directly on the productivity draw. Input cost, , is given by where is a composite input price of specialty and regular malt prices, is a composite input price of specialty and regular hop prices, is a scale parameter, ϕ is the cost share of malt, 1 − ϕ is the cost share of hops, and s is the elasticity of substitution between malt and hops.…”

“…As elaborated in the introduction, our modeling contribution is to accurately analyze the beer industry by integrating three key elements from the industrial organization literature: (i) heterogeneity of the monopolistic firms (Hopenhayn, 1992; Melitz, 2003); (ii) monopolistic products differentiated by variety and quality (Kugler & Verhoogen, 2012; Wang & Gibson, 2018); and (iii) coexistence of smaller monopolistic firms along with bigger oligopoly firms (Shimomura & Thisse, 2012). Our model employs a partial‐equilibrium framework because we focus only on the beer market, not the entire economy.…”

“…Recent studies that examined the relationship between firm size and quality found that larger firms in many industries differentiate their products (e.g., bar soap) by using higher quality inputs, paying more for inputs, and charging higher prices for outputs (Kugler & Verhoogen, 2012; Wang & Gibson, 2018). 17 For industries that produce relatively homogeneous products (e.g., corrugated boxes and ready‐mixed concrete), output prices tend to decrease as the plant sizes increase (Foster et al., 2008; Roberts & Supina, 1996; Syverson, 2007) because of economies of scale.…”

“…6 6 See Wang and Gibson (2018) for a recent application of how quality impacts producers' decision to export directly or through an intermediary. …”

Using imported intermediate goods: Selection and technology effects

“… A caveat regarding the data is that nonimporters may be purchasing intermediate goods domestically that were originally imported by trade intermediaries. For more on the role of trade intermediaries, see, for example, Ahn, Khandelwal, and Wei () and Wang and Gibson (). These papers view trade intermediaries as reducing fixed costs of importing but increasing variable costs of importing.…”