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The determinants of trade survival

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Abstract

The aim of this paper is to explore the patterns of trade duration across regions and to identify its determinants. Using an extended Cox model, we evaluate the effects of country and product characteristics, as well as of trade cost variables on the duration of trade relationships from 96 countries from 1995 to 2004. Our results suggest first that the duration of trade relationships increases with the region level of development: trade relationships from richer economies face lower hazard rates i.e. longer duration. Second, the type of product matters for export survival, trade relationships involving differentiated products show a hazard rate that is 11% to 13% lower than trade relationships involving homogeneous goods. Third, high export costs increase the probability of export failure in all regions but the effect diminishes with time, thus suggesting that export experience matters. Finally, the size of exports also matters: the larger the transaction, the higher the probability of survival.

Suggested Citation

  • Ana Cristina Molina & Marco Fugazza, 2009. "The determinants of trade survival," IHEID Working Papers 05-2009, Economics Section, The Graduate Institute of International Studies, revised Jun 2009.
    • Handle: RePEc:gii:giihei:heidwp05-2009
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    File URL: http://repec.graduateinstitute.ch/pdfs/Working_papers/HEIDWP05-2009.pdf
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    References listed on IDEAS

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    1. Brenton, Paul & Newfarmer, Richard, 2007. "Watching more than the Discovery channel : export cycles and diversification in development," Policy Research Working Paper Series 4302, The World Bank.
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    More about this item

    Keywords

    Duration; Trade; Fixed Costs;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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