What Happens in Paris, Does Not Stay in Paris: Trade Fairs and Search and Matching Frictions

Search and matching frictions prevent firms from forming international trade linkages.

Search and matching frictions prevent firms from forming international trade linkages. Despite trade fairs being a common and often subsidized tool to overcome these frictions, we lack causal evidence on how they facilitate link formation. We exploit a unique feature of Hungarian firms’ participation in the 1900 Paris World Exhibition, where a trial exhibition revealed firms’ ex-ante export potential category to develop a novel bounding strategy that compares treated firms to control groups from “above” and “below” in export potential. To implement our empirical strategy, we constructed a novel panel dataset of approximately 3,600 Hungarian manufacturing firms for the 1896–1906 period by digitizing, parsing and linking over 12,000 records across eleven historical sources, including exhibition catalogs, government surveys, commercial directories, official gazettes and patenting directories. We find that participation increases export probability by 4-10 percentage points, patenting probability by 4-6 percentage points and employment by 16–23% over eight years. Effects are larger when firms face fewer domestic competitors and more potential international buyers. This highlights both matching benefits and congestion effects when search and matching frictions are reduced.