TY  - JOUR
AU  - Casella,Alessandra
AU  - Rauch,James E.
TI  - Anonymous Market and Group Ties in International Trade
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6186
PY  - 1997
Y2  - September 1997
UR  - http://www.nber.org/papers/w6186
L1  - http://www.nber.org/papers/w6186.pdf
N1  - Author contact info:
Alessandra Casella
Department of Economics
Columbia University
420 West 118 Street
New York, NY 10027
Tel: 212/854-2459
Fax: 212/854-8059
E-Mail: ac186@columbia.edu

James E. Rauch
Department of Economics
University of California, San Diego
La Jolla, CA 92093-0508
Tel: 858/534-2405
Fax: 858/534-7040
E-Mail: jrauch@weber.ucsd.edu
AB  - When trade involves differentiated products, preferential ties to a group settled abroad facilitate an exporter's entry into the foreign market by providing information and access to distribution channels. This contrasts with the difficulties experienced by an unattached producer unfamiliar with the foreign environment. Inspired by the role of coethnic ties and business groups in East Asia, we build a simple general equilibrium model of trade that formalizes this observation.  Output is generated through bilateral matching o agents spanning a spectrum of types. Domestic matching is perfect--every trader knows the type of all others and can approach whomever he chooses, but international matching is random--every trader lacks the information to choose his partner's type.  However, group ties allow perfect matching abroad to a minority of individuals who have access to them and can decide whether or not to exploit them.  We show that in the absence of ties the existence of informational barriers reduces the volume of trade.  By increasing trade, group ties are beneficial to the economy as a whole, but have significant distributional effects. On average, group members benefit, but some may lose; non-members lose almost without exception, with the largest losses concentrated among those with the poorest domestic market niches.
ER  -