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CATs and DOGs

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  • Eckel, Carsten
  • Riezman, Raymond

Abstract

There is recent firm level evidence that manufacturing firms export products that they do not produce themselves. Bernard et al., 2019 call this "Carry-Along Trade" (CAT) and show that it is a widespread phenomenon among Belgian manufacturing exports. In this paper, we study why manufacturing firms may decide to have their products carried-along instead of exporting their products themselves. We show that if the "Delivery of Own Goods" (DOG) is an alternative option, the profitability of CAT is determined by demand linkages, productivity and transportation costs. Our focus is on the strategic aspects of CAT, and we illustrate that CAT can produce the same outcome as product-specific, market-specific collusion.

Suggested Citation

  • Eckel, Carsten & Riezman, Raymond, 2020. "CATs and DOGs," Munich Reprints in Economics 84749, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:84749
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    References listed on IDEAS

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    1. Andrew B. Bernard & J. Bradford Jensen & Stephen J. Redding & Peter K. Schott, 2007. "Firms in International Trade," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 105-130, Summer.
    2. Eckel, Carsten & Riezman, Raymond, 2020. "CATs and DOGs," Journal of International Economics, Elsevier, vol. 126(C).
    3. Virginia Di Nino, 2015. "�The phenomenal CAT�: firms clawing the goods of others," Questioni di Economia e Finanza (Occasional Papers) 281, Bank of Italy, Economic Research and International Relations Area.
    4. Arnarson, Björn Thor, 2020. "The superstar and the followers: Intra-firm product complementarity in international trade," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 277-304.
    5. Pol Antràs & Arnaud Costinot, 2011. "Intermediated Trade," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(3), pages 1319-1374.
    6. Ahn, JaeBin & Khandelwal, Amit K. & Wei, Shang-Jin, 2011. "The role of intermediaries in facilitating trade," Journal of International Economics, Elsevier, vol. 84(1), pages 73-85, May.
    7. Swati Dhingra, 2013. "Trading Away Wide Brands for Cheap Brands," American Economic Review, American Economic Association, vol. 103(6), pages 2554-2584, October.
    8. James E. Rauch & Joel Watson, 2004. "Network Intermediaries in International Trade," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(1), pages 69-93, March.
    9. Sharat Ganapati, 2018. "The Modern Wholesaler: Global Sourcing, Domestic Distribution, and Scale Economies," Working Papers 18-49, Center for Economic Studies, U.S. Census Bureau.
    10. Carsten Eckel & J. Peter Neary, 2010. "Multi-Product Firms and Flexible Manufacturing in the Global Economy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(1), pages 188-217.
    11. Bernardo S. Blum & Sebastian Claro & Ignatius Horstmann, 2010. "Facts and Figures on Intermediated Trade," American Economic Review, American Economic Association, vol. 100(2), pages 419-423, May.
    12. Andrew B. Bernard & Marco Grazzi & Chiara Tomasi, 2015. "Intermediaries in International Trade: Products and Destinations," The Review of Economics and Statistics, MIT Press, vol. 97(4), pages 916-920, October.
    13. Soderbery, Anson, 2018. "Trade elasticities, heterogeneity, and optimal tariffs," Journal of International Economics, Elsevier, vol. 114(C), pages 44-62.
    14. Soderbery, Anson, 2015. "Estimating import supply and demand elasticities: Analysis and implications," Journal of International Economics, Elsevier, vol. 96(1), pages 1-17.
    15. Kaleb Girma Abreha & Valérie Smeets & Frédéric Warzynski, 2013. "Coping with the Crisis: Recent Evolution in Danish Firms' International Trade Involvement, 2000-2010," Economics Working Papers 2013-15, Department of Economics and Business Economics, Aarhus University.
    16. Alessia Lo Turco & Daniela Maggioni, 2015. "Imports, Exports and the Firm Product Scope: Evidence From Turkey," The World Economy, Wiley Blackwell, vol. 38(6), pages 984-1005, June.
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    Cited by:

    1. Ariu, Andrea & Mayneris, Florian & Parenti, Mathieu, 2020. "One way to the top: How services boost the demand for goods," Journal of International Economics, Elsevier, vol. 123(C).
    2. Erbahar, Aksel & Rebeyrol, Vincent, 2023. "Trade intermediation by producers," Journal of International Economics, Elsevier, vol. 140(C).
    3. Eckel, Carsten & Riezman, Raymond, 2020. "CATs and DOGs," Journal of International Economics, Elsevier, vol. 126(C).

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    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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