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Diversification in the Small and in the Large: Evidence from Trade Networks
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Diversification in the Small and in the Large: Evidence from Trade Networks

Author

Listed:
  • Francis Kramarz
  • Isabelle Mejean

    (Ecole Polytechnique)

  • Julien Martin

    (UQAM)

Abstract

We study the extent to which the structure of an exporter's portfolio of buyers affects the volatility of its sales, volatility of bilateral exports. In our model, diversifying sales across a larger number of partners reduces the firm's exposure to idiosyncratic demand shocks, thus the volatility of its sales. Being connected with importers that also interact with other sellers creates comovements in sales across sellers. We show that both elements can generate "granular" fluctuations in aggregate exports. Based on highly detailed export data, we show that exporters are little diversified in sales and that trade networks are highly connected across exporters. This participates to explaining the high volatility of bilateral exports in our data.

Suggested Citation

  • Francis Kramarz & Isabelle Mejean & Julien Martin, 2014. "Diversification in the Small and in the Large: Evidence from Trade Networks," 2014 Meeting Papers 663, Society for Economic Dynamics.
    • Handle: RePEc:red:sed014:663
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    References listed on IDEAS

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    1. Kristian Behrens & Gregory Corcos & Giordano Mion, 2013. "Trade Crisis? What Trade Crisis?," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 702-709, May.
    2. Nicolas Berman & Philippe Martin & Thierry Mayer, 2012. "How do Different Exporters React to Exchange Rate Changes?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(1), pages 437-492.
    3. Daron Acemoglu & Vasco M. Carvalho & Asuman Ozdaglar & Alireza Tahbaz‐Salehi, 2012. "The Network Origins of Aggregate Fluctuations," Econometrica, Econometric Society, vol. 80(5), pages 1977-2016, September.
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    Cited by:

    1. Arne J. Nagengast & Robert Stehrer, 2016. "The Great Collapse in Value Added Trade," Review of International Economics, Wiley Blackwell, vol. 24(2), pages 392-421, May.
    2. Federico Esposito, 2017. "Entrepreneurial Risk and Diversification through Trade," Working Papers w201714, Banco de Portugal, Economics and Research Department.
    3. Esposito, Federico, 2019. "Demand Risk and Diversification through Trade," MPRA Paper 99875, University Library of Munich, Germany.
    4. Urška Čede & Bogdan Chiriacescu & Péter Harasztosi & Tibor Lalinsky & Jaanika Meriküll, 2018. "Export characteristics and output volatility: comparative firm-level evidence for CEE countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 154(2), pages 347-376, May.
    5. Federico Esposito, 2016. "Risk Diversification and International Trade," 2016 Meeting Papers 302, Society for Economic Dynamics.
    6. Esposito, Federico, 2022. "Demand risk and diversification through international trade," Journal of International Economics, Elsevier, vol. 135(C).

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