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Intermediation in Foreign Trade: When Do Exporters Rely on Intermediaries?
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Abstract
The paper explores theoretically and empirically why trade intermediaries (TIs) are frequently used as agents for exports to some countries but not to others. We adapt a standard intra-industry trade model with variable export costs (e.g. transport) and fixed export costs (e.g. market access) to include a TI that is able to pool market access cost. From this framework explanatory factors for the TI share in a country's exports are derived and subsequently tested with a new data set based on French customs information. The paper finds that: (i) higher market access costs increase the TI share, (ii) smaller export markets feature a larger TI share, (iii) the TI share is independent from variable (distance-dependent) export costs.trade intermediation, indirect exports, transaction costs, monopolistic competition