Front Matter
Author: Parisa Kamali1
  • 1 0000000404811396https://isni.org/isni/0000000404811396International Monetary Fund

Front Matter Page

WP/19/302

IMF Working Paper

Exporting Through Intermediaries: Impact on Export Dynamics and Welfare

Parisa Kamali

INTERNATIONAL MONETARY FUND

Exporting Through Intermediaries: Impact on Export Dynamics and Welfare

Parisa Kamali*

The most recent version of the paper can be found here

December 2019

Abstract

In many countries, a sizable share of international trade is carried out by intermediaries. While large firms tend to export to foreign markets directly, smaller firms typically export via intermediaries (indirect exporting). I document a set of facts that characterize the dynamic nature of indirect exporting using firm-level data from Vietnam and develop a dynamic trade model with both direct and indirect exporting modes and customer accumulation. The model is calibrated to match the dynamic moments of the data. The calibration yields fixed costs of indirect exporting that are less than a third of those of direct exporting, the variable costs of indirect exporting are twice higher, and demand for the indirectly exported products grows more slowly. Decomposing the gains from indirect and direct exporting, I find that 18 percent of the gains from trade in Vietnam are generated by indirect exporters. Finally, I demonstrate that a dynamic model that excludes the indirect exporting channel will overstate the welfare gains associated with trade liberalization by a factor of two.

JEL classifications: F12, F14.

Keywords: indirect exporting, direct exporting, customer accumulation, variable costs, bilateral trade liberalization, welfare gains, tariff revenues, Vietnam.

Contents

  • 1 Introduction

  • 2 Data and Empirical Findings

  • 2.1 Data

  • 2.1.1 The Representativeness of World Bank and SME Surveys

  • 2.1.2 Cross-sectional Characteristics of Indirect Exporters

  • 2.2 Findings on the Persistence of Indirect Exporting

  • 2.3 Findings on the Impacts of Indirect Exporting on the Extensive Margin of Direct Exporting

  • 2.4 Findings on the Impacts of Indirect Exporting on the Export-to-Sales Ratio of Direct Exporting

  • 3 Model

  • 3.1 Consumers

  • 3.2 Firms

  • 3.2.1 Exporting Technologies

  • 3.2.2 Customer Accumulation

  • 3.3 The Problem of the Firm

  • 3.3.1 Price Decision of the Firm

  • 3.3.2 The Participation Decision of the Firm

  • 3.4 Stationary Equilibrium

  • 4 Calibration

  • 4.1 Parameterization

  • 4.2 Calibration Strategy

  • 5 Results

  • 5.1 Dynamics of Indirect Exporting

  • 5.2 Gains from Indirect Exporting

  • 5.3 Welfare Gains from Bilateral Trade Liberalization

  • 5.3.1 Welfare Gains from Trade Liberalization in the Baseline Model

  • 5.3.2 Welfare Gains from Trade Liberalization in a Dynamic Model without Indirect Exporting

  • 5.4 Robustness Checks

  • 5.4.1 Persistence of the Fixed Cost Distributions

  • 5.4.2 Elasticity of Substitution

  • 6 Counterfactual Experiments

  • 6.1 Trading License Requirement

  • 6.2 Economies of Scope

  • 7 Conclusion

  • A Data Appendix

  • A.1 Small- and Medium-Sized Enterprise Survey

  • A.2 World Bank Enterprise Survey

  • A.3 Vietnamese Enterprise Survey

  • B Exporting Directly and Indirectly Simultaneously

  • C Impact of Indirect Exporting on the Domestic Sales of the New Direct Exporters

  • D Alternative Model: Persistent Shocks to Demand

  • E The Relationship between the Aggregate Price Index and the Variable Costs of Exporting

*

International Monetary Fund, 1900 Pennsylvania Ave NW, Washington, DC 20431. E-mail: pjalalka-mali@imf.org. I am grateful for the invaluable advice of Timothy Kehoe, Manuel Amador, Kei-Mu Yi, and Doireann Fitzgerald. I would also like to thank the participants of the Trade and Development workshop at the University of Minnesota for their questions and comments. The research is supported by the University of Minnesota Doctoral Dissertation Fellowship. The views expressed herein are those of the author and should not be attributed to the IMF, its Executive Board, or its management. All errors are mine.

Exporting Through Intermediaries: Impact on Export Dynamics and Welfare
Author: Parisa Kamali