Ins, Outs, and the Duration of Trade

Besedeš, Tibor; Prusa, Thomas J.

doi:10.2139/ssrn.659043

Cited by 120 publications

(182 citation statements)

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“…In other words, contrary to what one would expect, the level of aggregation is not very important, and even at a highly aggregated level, trade is very short-lived. While Besedeš and Prusa (2006a) draw the same surprising conclusion for US imports, we again note that EU trade is actually even more short-lived as the median duration of 1-digit (SITC) imports to the US is five or ten years (depending on the time period under study).…”

Section: Describing the Duration Of Eu Importssupporting

confidence: 64%

“…One of the first papers to directly ask the question "how long do trade relationships last?" is Besedeš and Prusa (2006a). Using data on US imports at the 7-digit (US Tariff Schedule) level from 160 exporters for 1972-1988 to estimate Kaplan-Meier survival functions, their results suggest that the duration of exports to the US is in general very short.…”

Section: Empirical Papers On the Duration Of Tradementioning

confidence: 99%

“…Besedeš and Prusa (2006b) make use of the same US import data as Besedeš and Prusa (2006a). Basing their investigation on the model by Rauch and Watson (2003), they add the Rauch (1999) classification of goods into homogeneous, reference-priced and differentiated.…”

Section: Empirical Papers On the Duration Of Tradementioning

confidence: 99%

“…One trade theory that explicitly considers how trade patterns evolve over time is the product-cycle theory (Vernon, 1966). 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.…”

Section: Other Relevant Researchmentioning

confidence: 99%

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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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Section: Describing the Duration Of Eu Importssupporting

confidence: 64%

Section: Empirical Papers On the Duration Of Tradementioning

confidence: 99%

Section: Empirical Papers On the Duration Of Tradementioning

confidence: 99%

Section: Other Relevant Researchmentioning

confidence: 99%

See 2 more Smart Citations

Exploring the duration of EU imports

2011

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“…Third, the paper brings a new perspective to the existing work on the survival of trade relationships. Besedes and Prusa (2006a) were the …rst to apply the analytical tools of survival analysis in the context of international trade and discovered that most of the exports to the United States are surprisingly short-lived. Subsequent research examined whether the patterns of export survival systematically vary across products and countries.…”

Section: Introductionmentioning

confidence: 99%

Finance, Comparative Advantage, and Resource Allocation*

2017

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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. We show that exported products exit the US market sooner if they violate the Heckscher-Ohlin notion of comparative advantage. Crucially, this pattern is stronger when exporting country has a well-developed banking system, measured by a high ratio of bank credit over the GDP. Banks thus push firms away from exports that are facing an uphill battle on a competitive foreign market due to a suboptimal use of the domestic factor endowment. Our results imply a disciplining role for bank credit in terminating inefficient trade flows. This constitutes a new channel through which finance improves resource allocation in the real economy. Terms of use: Documents in JEL AbstractWe show that exported products exit the US market sooner if they violate the Heckscher-Ohlin notion of comparative advantage. Crucially, this pattern is stronger when exporting country has a well-developed banking system, measured by a high ratio of bank credit over the GDP. Banks thus push …rms away from exports that are facing an uphill battle on a competitive foreign market due to a suboptimal use of the domestic factor endowment. Our results imply a disciplining role for bank credit in terminating ine¢ cient trade ‡ows. This constitutes a new channel through which …nance improves resource allocation in the real economy.

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Good Times and Bad Times, with Endogenous Trade Policy Responses

Edwards

2017

Globalization

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Globalisation is associated with long periods of sustained economic growth and credit expansion, whereas major recessions tend to lead to falling trade and protectionism. I investigate this, using a model where an important component of trade is search by rms trying out new trade partners. To model this, I set up a schematic model of upstream-downstream matching between rms, where match quality determines prots. Prior to globalisation, Northern upstream and downstream rms work together, to avoid trade costs. As trade is liberalised, new North-South matches begin to develop, but at rst these are footloose (since many are experimental in nature), and can be driven out rapidly if there is a demand crisis. The presence of a highly elastic, searching element of trade, during periods of global liberalisation and fast growth means that countries cannot gain terms-of-trade advantage from protection. By contrast, if a prolonged recession drives out searching rms, the remaining trade is relatively priceinelastic, and beggar-thy-neighbour taris become attractive. Such observations are consistent with the rapid and damaging switch to protectionism after the 1929 Stock Market Crash, and emphasise the need for continued multilateral commitment to trade liberalisation, in the aftermath of the 2008 Great Trade Recession.

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Ins, Outs, and the Duration of Trade

Cited by 120 publications

References 19 publications

Exploring the duration of EU imports

Exploring the duration of EU imports

Finance, Comparative Advantage, and Resource Allocation*

Good Times and Bad Times, with Endogenous Trade Policy Responses

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