The matching and sorting of exporting and importing firms: Theory and evidence

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4 Scopus citations

Abstract

This paper develops a general equilibrium model of international trade with heterogeneous exporters and heterogeneous importers. This theory is guided by new findings drawn from a matched exporter-importer dataset that characterizes the relationships between exporting and importing firms. I find that most exporters have a single importing partner, that highly productive exporters tend to trade with highly productive importers, and that the value traded is positively correlated with both exporter and importer productivities. The model analyzes the selection of exporters and importers into trading pairs and features simultaneous free entry into exporting and into importing. This theory provides a rationale for the fixed costs of entering export markets, associating them with the costs of searching for importing firms that distribute a product to final consumers abroad. I test this theory by studying the response of exporting and importing firms to the recent Colombia-U.S. free trade agreement. This evidence illustrates a novel mechanism of adjustment of U.S. firms to trade liberalization.

Original languageEnglish
Article number103430
JournalJournal of International Economics
Volume131
DOIs
StatePublished - Jul 2021

Bibliographical note

Publisher Copyright:
© 2021 Elsevier B.V.

Keywords

  • Exporters
  • Free trade agreement
  • Heterogeneous firms
  • Importers

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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