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CEP discussion paper
The Buyer Margins of Firms' Exports
Jerónimo Carballo, Gianmarco I. P. Ottaviano and Christian Volpe Martincus
July 2013
Paper No' CEPDP1234:
Full Paper (pdf)

JEL Classification: F12; F14

Tags: firm heterogeneity; taste heterogeneity; import-export relations; competition; selection

We use detailed data on exporters from Costa Rica, Ecuador and Uruguay as well as on their buyers to show that aggregate exports are disproportionally driven by few multi-buyers exporters whose foreign sales of any product are in turn accounted for by few dominant buyers. We propose an analytically solvable multi-country model of endogenous selection in which dominant exporters, dominant products and dominant buyers emerge in parallel as multi-product sellers with heterogeneous technologies compete for buyers with heterogeneous needs. The model not only provides an explanation of the existence of dominant buyers but also makes specific predictions on how the relative importance of dominant buyers should vary across export destinations depending on their market size and accessibility. We show that these predictions are borne out by our data and discuss their welfare implications in terms of gains from trade.