Characteristics of International Trade Intermediaries and Their Location in the Supply Chain

Abstract

Wholesale trade firms and their role in international trade are examined using transaction and firm level data sets from Denmark for the period 1998–2006. Compared to internationally trading manufacturing firms, wholesale firms trading internationally are found to focus on fewer countries with more products and lower unit values, and their involvement in international trade transactions differ significantly across industries. Manufacturing industries with more competitive structure, lower firm size, lower capital intensity, higher production fragmentation and lower export/import intensities are found to have higher wholesale share of export. The analysis shows that export and import premia also exist among wholesale trade firms, which is in line with the idea that these premia result from fixed costs of exporting/importing. Systematic differences between wholesale trade firms in intermediate goods markets versus in consumption goods markets are also documented and found critical in understanding the role of intermediaries in international trade. While in intermediate goods export wholesale trade firms’ unit prices are found to be significantly higher than manufacturers unit prices of the same good, the opposite holds true for consumption goods export. Wholesale trade firms that specialize in export of intermediate goods are found to be more skill intensive and pay more in comparison to other exporting wholesale trade firms. The wage premium for exporters of intermediate goods for professional level occupations is robust to controlling for detailed firm and worker characteristics. The results suggest that theories highlighting the potential roles of intermediaries should take the intermediaries’ location in the supply chain into account.