《Anonymous market and group ties in international trade》.pdf

Journal of International Economics 58 (2002) 19–47 /locate/econbase Anonymous market and group ties in international trade Alessandra Casellaa,b , *, James E. Rauchc aDepartment of Economics, Columbia University, New York, NY 10027, USA b GREQAM, 13002 Marseille, France cDepartment of Economics, University of California, San Diego, La Jolla, CA 92093, USA Received 25 July 2000; received in revised form 20 April 2001; accepted 13 June 2001 Abstract History provides many examples of cohesive groups dispersed over several countries who exploit the ties between their members to gain entry into foreign markets. The phenomenon is well-established empirically and noteworthy because it suggests the importance of informational barriers in international transactions. We present a simple model where output is produced through a joint venture, and agents have complete information domestically but are unable to judge the quality of their match abroad. A minority of individuals, otherwise identical to all others, can exploit complete information in international matches between group members, if they so choose. Group ties increase aggregate trade and income, but hurt the anonymous market because they deprive it disproportionately of the group’s more productive members.  2002 Elsevier Science B.V. All rights reserved. Keywords : Matching; Networks; Informational barriers; International trade JEL classification : C78; F12; F23 1. Introduction From the Middle Ages to present days, ethnic groups that are geographically dispersed but cohesive have repeatedly achieved economic prominence. Often but not always as consequence