GEP 11/25: Who Uses Intermediaries in International Trade? Evidence from Firm-level Survey Data

Summary

Using data from the World Bank Enterprise Survey, this paper analyzes which manufacturers make use of trade intermediaries to access foreign markets.

Abstract

The present paper uses data from the World Bank Enterprise Survey conducted in Turkey in 2005 to shed light on the firms which use intermediaries in international trade. It lends robust empirical support to recent theories which suggest that indirect exporters are mostly small firms which are not profitable enough to cover the high fixed costs of building their own distribution network abroad. Manufacturers which introduce entirely new products to foreign markets are more likely to use trade intermediaries, as are firms which produce low quality goods. In contrast, neither foreign ownership nor credit constraints are correlated with the choice of export mode. Moreover, firms which rely on trade intermediaries to sell their goods abroad also do so to source their foreign inputs, implying that the role of intermediaries in facilitating trade may be larger than previous studies suggest.

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Authors

Jennifer Abel-Koch

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