Learning, incomplete contracts and export dynamics: Theory and evidence from French firms

Author(s)
Romain Aeberhardt, Ines Buono, Harald Fadinger
Abstract

Using French firm-level trade data, we provide empirical support for a heterogenous firm model in which exporting requires finding a local partner in each market. In the model, contracts are incomplete, exporters must learn the reliability of their partners through experience and export behaviour is state-dependent due to matching frictions. As predicted by our theoretical model, we find that better legal institutions alleviate contracting frictions especially in sectors with large contracting problems, thereby increasing state dependence more in those sectors. Finally, hazard rates depend on the quality of local legal institutions and decline with the age of the relationship, as unreliable partners are weeded out.

Organisation(s)
Department of Economics
External organisation(s)
CREST-INSEE, Banca d'Italia
Journal
European Economic Review
Volume
68
Pages
219-249
No. of pages
31
ISSN
0014-2921
DOI
https://doi.org/10.1016/j.euroecorev.2014.02.004
Publication date
05-2014
Peer reviewed
Yes
Austrian Fields of Science 2012
502047 Economic theory, 502003 Foreign trade
Keywords
ASJC Scopus subject areas
Economics and Econometrics, Finance
Portal url
https://ucris.univie.ac.at/portal/en/publications/learning-incomplete-contracts-and-export-dynamics-theory-and-evidence-from-french-firms(557fe9a4-1a7a-48fc-aba2-dfe4e8d88426).html