What affects the survival of trade relationships? Evidence from road disruptions in Colombia

With climate change, weather patterns like El Niño Southern Oscillation (ENSO) are becoming more persistent and disruptive. It is crucial to understand how to adapt to extreme weather shocks. This paper investigates how extreme weather events can spread through trade channels, and it is the first one that focuses on the extensive margin of relationships. I use the rain season of La Niña in Colombia during 2010-2011, which caused major road closures that disrupted the transportation of goods. I focus in the Colombian flower sector and its main export market, the US. I find treated relationships exit less after the shock, but within treatment, links from larger and more connected exporters exit more relative to links with small and less-connected exporters. The shock also induced larger exporters to increase their matching after the shock relative to non-affected exporters. The empirical results point out that search frictions are a mechanism at play and the effect on firms varies depending on their size. In this sense, replacing buyers might be more costly to small firms, which explains the lower exit rates observed in the data, but other mechanisms are needed to explain the different responses when considering different network sizes.