Learning and the Value of Relationships in International Trade
February 2016
Working Paper Number:
CES-16-11
Abstract
How valuable are long-term supplier relationships? To address this question, this paper explores relationships between U.S. importers and their suppliers abroad. We establish several facts: almost half of U.S. imports involve relationships three years or older, relationship survival and traded quantity increase as a relationship ages, and long-term relationships were more resilient in the 2008-09 financial crisis. We present a model of importer learning and calibrate it using our data. We estimate large differences in the value of relationships across countries. Counterfactuals show that relationships are central to trade dynamics.
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foreign trade,
international trade,
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Center for Economic Studies,
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World Bank,
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Longitudinal Firm Trade Transactions Database,
Customs and Border Protection,
Michigan Institute for Data Science
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