Magnus Tolum Buus, US San Diego/University of Copenhagen (Job Market Seminar)

"Network Effects in Export Markets: Evidence from Matched Exporter-Importer Data"

Abstract

This paper provides novel causal evidence of network effects in export markets. Using Danish firm-to-firm trade data, I show that a larger existing buyer network leads to more new buyer relationships. Specifically, one additional buyer match in the previous year leads to 0.2 new buyer matches. I establish causality by exploiting variation in exporters’ access to export promotion services. I complement the direct, causal evidence with indirect, correlational evidence based on observed price variation both in the cross-section and over time. Network effects explain about half the total accumulation of buyers by Danish exporters and, hence, is an important driver of total export growth. These findings have important implications for the optimal design of trade policies: Matching new exporters to foreign importers should be a primary objective.

Contact person: Mette Ejrnæs