PEPP Seminar (July 7th, 2023): “Strategic Carry-Along Trade” by Prof. Zhe Chen
2023/06/22
By Prof. Zhe Chen (Associate Professor at the University of International Business and Economics in China)
Date： Thursday, July 7th, 2023
Time：16:45～18:15 (JST)
Venue: 3K102
Abstract: Leveraging the detailed Chinese firm-product-destination level data, this study documents the prevalence of carry-along trade (CAT) in China and then explores the strategic behaviour of firms in CAT. Motivated by the asymmetric spillover effects between produced and sourced products along with CAT, we develop a model where exporters self-select into one of the followings: non-CAT exporter, pure CAT exporter and mixed CAT exporter. We then investigate the mechanisms where sourced products are carried to boost the demand of produced products and generate testable implications. First, sourced products carried by mixed CAT exporters tend to have a higher demand elasticity than produced products. Second, when an exporter produces multiple products, the core produced product is more likely to be sold with a sourced product. Third, among the three types of CAT exporters, the production cost of pure CAT exporter is the highest and the marketing cost of non-CAT exporter is the highest. Consistent evidence is found to support the above three implications.
