On differentiation, duration and financial crises: An empirical analysis of the role played by product differentiation and the ”rate of survival” to the patterns of Swedish import emerged from the recent financial crisis

Abstract: Since the availability of disaggregated data, researchers have empirically shown that the extent of product differentiation and the intensive margin of trade matters for explaining patterns of international trade. Recently, there seems to be an emerging interest in studying the potential impact of financial crises on international trade dynamics. Utilizing Rauch´s production scheme (1999) and Besedeš and Prusa (2006a) innovative construction to the intensive margin of trade, the work at hand investigates whether the type of good and the duration (survival rate) of trade relationships facilitate differing trade patterns resulted from the recent financial crisis. Results indicate that these two aspects have an unequivocal influence on the mechanisms through which a financial crisis might impact import relations. Most importantly, whereas import of differentiated goods has been more negatively impacted by the crisis, higher survival rates seem to hamper the reduction in import values during the crisis; which also found to be more significant for Swedish traders of differentiated goods.