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Relationship stickiness, international trade, and economic uncertainty

Author

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  • Julien Martin

    (UQAM - Université du Québec à Montréal = University of Québec in Montréal, CEPR - Center for Economic Policy Research)

  • Isabelle Mejean

    (Institut d'Études Politiques [IEP] - Paris, CEPR - Center for Economic Policy Research)

  • Mathieu Parenti

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CEPR - Center for Economic Policy Research, ULB - Université libre de Bruxelles)

Abstract

We study how stickiness in business relationships influences the trade impact of aggregate uncertainty. To begin, we construct a product-level index of relationship stickiness using firm-to-firm relationship duration data. We then demonstrate how relationship stickiness shapes trade dynamics in response to uncertainty shocks.We find that episodes of uncertainty lead to a decline in the overall establishment of new business relationships, with the impact varying depending on the level of stickiness. In markets characterized by high stickiness, uncertainty shocks primarily impede investments in new firm-to-firm relationships. In contrast, for non-sticky products, the adjustment to uncertainty shocks mainly manifests as the disruption of existing relationships.

Suggested Citation

  • Julien Martin & Isabelle Mejean & Mathieu Parenti, 2024. "Relationship stickiness, international trade, and economic uncertainty," PSE Working Papers halshs-04721417, HAL.
    • Handle: RePEc:hal:psewpa:halshs-04721417
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-04721417v1
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