Search Frictions in International Good Markets

56 Pages Posted: 15 Jan 2019

See all articles by Clemence Lenoir

Clemence Lenoir

National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE)

Julien Martin

University of Quebec at Montreal (UQAM)

Isabelle Mejean

Ecole Polytechnique, Paris; Centre for Economic Policy Research (CEPR)

Date Written: January 2019

Abstract

This paper studies how search frictions in international good markets can distort competition between firms of heterogeneous productivity. We add bilateral search frictions between buyers and sellers in a Ricardian model of trade. Search frictions prevent buyers from identifying the most productive sellers which induces competitive distortions and benefits low-productivity firms at the expense of high-productivity ones. We use French firm-to-firm trade data and a GMM estimator to recover search frictions faced by French exporters at the product and destination level. They are found more severe in large and distant countries and for products that are more differentiated. In a counterfactual exercise, we show that reducing the level of search frictions leads to an improvement in the efficiency of the selection process because the least productive exporters are pushed out of the market while the export probability and the conditional value of exports increase at the top of the productivity distribution. As a consequence, the mean productivity of exporters increases significantly.

Keywords: firm-to-firm trade, Ricardian trade model, search frictions, structural estimation

JEL Classification: F10, F11, F14, L15

Suggested Citation

Lenoir, Clemence and Martin, Julien and Mejean, Isabelle, Search Frictions in International Good Markets (January 2019). CEPR Discussion Paper No. DP13442, Available at SSRN: https://ssrn.com/abstract=3315374

Clemence Lenoir (Contact Author)

National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE) ( email )

92245 Malakoff Cedex
France

Julien Martin

University of Quebec at Montreal (UQAM) ( email )

PB 8888 Station DownTown
Succursale Centre Ville
Montreal, Quebec H3C3P8
Canada

Isabelle Mejean

Ecole Polytechnique, Paris ( email )

1 rue Descartes
Paris, 75005
France

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
1
Abstract Views
629
PlumX Metrics