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Trade relationships during and after a crisis

Alejandra Martinez

TL;DR

This study investigates how temporary disruptions in buyer–seller relationships, driven by relational contracts, propagate through firms' trading portfolios in international trade. Exploiting an exogenous La Niña-induced road-disruption shock to Colombian flower exporters, it combines detailed transaction data with route-level exposure to identify relationship- and firm-level adjustments. The findings reveal heterogeneous responses: within-importer exposures reduce relationship terminations during the shock, but firms with highly exposed portfolios experience significant churn and exit, leading to persistent portfolio contraction. A parsimonious theoretical framework clarifies how indirect and direct effects of disruptions interact to shape these outcomes, highlighting portfolio structure as a key determinant of resilience in trade networks.

Abstract

I study how firms adjust to temporary disruptions in international trade relationships organized through relational contracts. I exploit an extreme, plausibly exogenous weather shock during the 2010-11 La Niña season that restricted Colombian flower exporters' access to cargo terminals. Using transaction-level data from the Colombian-U.S. flower trade, I show that importers with less-exposed supplier portfolios are less likely to terminate disrupted relationships, instead tolerating shipment delays. In contrast, firms facing greater exposure experience higher partner turnover and are more likely to exit the market, with exit accounting for a substantial share of relationship separations. These findings demonstrate that idiosyncratic shocks to buyer-seller relationships can propagate into persistent changes in firms' trading portfolios.

Trade relationships during and after a crisis

TL;DR

This study investigates how temporary disruptions in buyer–seller relationships, driven by relational contracts, propagate through firms' trading portfolios in international trade. Exploiting an exogenous La Niña-induced road-disruption shock to Colombian flower exporters, it combines detailed transaction data with route-level exposure to identify relationship- and firm-level adjustments. The findings reveal heterogeneous responses: within-importer exposures reduce relationship terminations during the shock, but firms with highly exposed portfolios experience significant churn and exit, leading to persistent portfolio contraction. A parsimonious theoretical framework clarifies how indirect and direct effects of disruptions interact to shape these outcomes, highlighting portfolio structure as a key determinant of resilience in trade networks.

Abstract

I study how firms adjust to temporary disruptions in international trade relationships organized through relational contracts. I exploit an extreme, plausibly exogenous weather shock during the 2010-11 La Niña season that restricted Colombian flower exporters' access to cargo terminals. Using transaction-level data from the Colombian-U.S. flower trade, I show that importers with less-exposed supplier portfolios are less likely to terminate disrupted relationships, instead tolerating shipment delays. In contrast, firms facing greater exposure experience higher partner turnover and are more likely to exit the market, with exit accounting for a substantial share of relationship separations. These findings demonstrate that idiosyncratic shocks to buyer-seller relationships can propagate into persistent changes in firms' trading portfolios.
Paper Structure (21 sections, 23 equations, 20 figures, 1 table)

This paper contains 21 sections, 23 equations, 20 figures, 1 table.

Table of Contents

  1. Introduction
  2. Context: 2010-11 La Niña and Colombian flower exporters
  3. The 2010-11 La Niña event
  4. The Colombian flower sector
  5. Data and variables
  6. Data
  7. Construction of variables
  8. Summary statistics
  9. Empirical strategy
  10. Identification assumption
  11. Estimating equations
  12. Results
  13. Theoretical framework
  14. Conclusion
  15. Figure appendix
  16. ...and 6 more sections

Figures (20)

  • Figure 1: Timeline of La Niña 2010-11 in Colombia
  • Figure 2: Flooded area in during La Niña 2010-11
  • Figure 3: Cut flowers exported quantity and trade value
  • Figure 4: Road closures and cargo terminals affecting flower exporters 2010--11
  • Figure 5: Distribution of firm-level exposure to the shock
  • ...and 15 more figures

Theorems & Definitions (2)

  • proof
  • proof