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A theory on the role of wholesalers in international trade based on economies of scope
Stockholm University, Faculty of Social Sciences, Department of Economics.
Number of Authors: 1
2018 (English)In: Canadian Journal of Economics, ISSN 0008-4085, E-ISSN 1540-5982, Vol. 51, no 1, p. 156-185Article in journal (Refereed) Published
Abstract [en]

This paper offers a theoretical foundation for the existence of wholesalers and other intermediaries in international trade and analyzes their role in an economy with heterogeneous manufacturing firms and fixed costs of exporting. Wholesalers are assumed to possess a technology such that they can buy manufacturing goods domestically and sell in foreign markets and they can, unlike manufacturers, export more than one good. A wholesaler therefore faces an additional fixed cost, which increases in the number of goods it handles. The presence of wholesale firms leads to productivity sorting. The most productive firms export on their own by paying a fixed cost, but a range of firms with intermediate productivity levels export through international wholesalers. A higher fixed cost of exporting to a destination means that wholesalers handle: (i) a higher share of total export volumes to this destination and (ii) a higher share of the exported product scope (i.e., the number of exported products) to this destination. A higher fixed cost of exporting gives wholesalers a larger role, since these can spread the fixed cost across more than one good. The wholesale technology therefore exhibits economies of scope. An empirical analysis using Swedish firm-level data supports the main assumption and predictions of the model.

Place, publisher, year, edition, pages
2018. Vol. 51, no 1, p. 156-185
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:su:diva-154613DOI: 10.1111/caje.12319ISI: 000425509100006OAI: oai:DiVA.org:su-154613DiVA, id: diva2:1194981
Available from: 2018-04-04 Created: 2018-04-04 Last updated: 2018-04-04Bibliographically approved

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