Learning and the Value of Relationships in International Trade

This paper explores the characteristics of importer-exporter relationships and their role in international trade using detailed U.S. import data. It presents new stylized facts that highlight the relevance of firm-to-firm relationships for international trade. While most relationships are short-term, the value of trade is spread evenly across new, medium-term, and long-term relationships. Relationship length is closely tied to product characteristics, source country institutions, and firm size. In addition, established relationships are central to firms expanding their product scope or adjusting their supply network. We develop a model of learning about the reliability of trading partners in international trade that is consistent with these findings. Counterfactuals based on a calibrated version of the model suggest that relationships have a large quantitative role in explaining international trade flows and that disruptions of relationships have long-lasting adverse effects.