Seller-buyer matching in international good markets

Résumé

We develop a model of matching frictions in international good markets and study its implications for individual and aggregate trade flows. The model is an extension of the Eaton and Kortum (2002) framework to matching frictions. At the aggregate level, matching frictions have a monotonic and negative impact on bilateral trade flows, and thus do not differ from other sources of trade frictions. However, matching frictions affect individual exporters in a non-monotonous way. Low-productive exporters do not benefit from less matching frictions since the randomness is what lets them serve buyers that they would not be able to reach in a frictionless market. Instead, highly productive firms always benefit from meeting with a larger number of potential partners. We use firm-to-firm trade data in the European Union to estimate the magnitude of such matching frictions. We discuss how the model helps improve our understanding of firms’ export patterns.