Search Frictions in International Goods Markets

Clémence Lenoir (1) , Julien Martin (2, 1, 3) , Isabelle Mejean (4, 3)

1 CREST - Centre de Recherche en Économie et Statistique
2 UQAM - Université du Québec à Montréal = University of Québec in Montréal
3 CEPR - Center for Economic Policy Research
4 ECON - Département d'économie (Sciences Po)

This paper studies how frictions in the acquisition of new customers distort the allocation of activities across heterogeneous producers. We add bilateral search frictions in a Ricardian model of trade and use French firm-to-firm trade data to estimate search frictions faced by French exporters in foreign markets. Estimated coefficients display a strong degree of heterogeneity across countries and products, that correlates with various proxies for information frictions. A counterfactual reduction in the level of search frictions improves the efficiency of the selection process and increases the average productivity of exports, because the least productive exporters are pushed out of the market, whereas exports increase at the top of the productivity distribution.

Keywords: Firm-to-firm trade; Search frictions; Ricardian trade model; Structural estimation

Domains: Humanities and Social Sciences; Economics and Finance

Clémence Lenoir, Julien Martin, Isabelle Mejean. Search Frictions in International Goods Markets. 2022. ⟨hal-03812813⟩