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Bilateral Economies of Scope

Yao Amber Li¹; Sichuang Xu²; Stephen Yeaple³; Tengyu Zhao⁴

¹ The Hong Kong University of Science and Technology [email protected] · ² The Chinese University of Hong Kong, Shenzhen [email protected] · ³ Penn State University, NBER and CESifo [email protected] · ⁴ Institute of World Economy and School of Economics, Fudan University; Shanghai Institute of International Finance and Economics [email protected]

International transactions are costly because they require investments in logistics, contracts, and the acquisition of local institutional knowledge. We posit that a portion of the fixed cost of entering a specific export market can be used toward covering the cost of acquiring imported inputs from that same market, and vice versa. Using dis-aggregated transactions data for Chinese firms from 2000 to 2015, we document firm-level trading patterns suggesting such bilateral economies of scope. Through a structural model, we estimate that the simultaneous export and import in a given country reduce export and import fixed costs by around 42 and 35 percent, respectively.

DOI

10.1162/rest_a_01543

Pages

1-45

Language

en

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