Export Growth and Credit Constraints

Besedeš, Tibor; Kim, Byung-Cheol; Lugovskyy, Volodymyr

doi:10.2139/ssrn.1940753

Cited by 24 publications

(26 citation statements)

References 39 publications

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“… There are other models in the literature, in which firms borrow to cover their variable costs (e.g., Besedeš, Kim, & Lugovskyy, ; Chor & Manova, ; Feenstra, Li, & Yu, ). …”

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confidence: 99%

Asymmetric effects of financial development on export price and quality across countries

Choi

Lugovskyy

2019

Rev International Economics

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A large body of literature has emphasized the importance of financial development (FD) for economic growth and exporting. 1 Nonetheless, recent empirical findings have shown that FD does not affect the growth of low-income countries. 2 These findings raise questions about how FD affects exporting, and whether FD benefits all exporting countries equally.These aforementioned questions motivate us to explore the effects of FD on two essential components of exporting: export prices and export quality. 3 We find that these effects are highly asymmetric across countries, and we provide an explanation for these asymmetries. Additionally, our findings suggest that improving the quality of financial institutions alone is unlikely to boost quality or lower export prices in low-income countries.Theoretically, we provide a unifying framework to explain why and how the effects of FD on export quality and prices differ across countries. A key component of our model is based on the AbstractWe derive two novel predictions: financial development has a more pronounced effect on quality in countries with greater labor productivity, and its effect on export prices is U-shaped in labor productivity. We confirm our predictions empirically and show that the negative effect of financial development on export prices is greatest in middle-productivity countries, while its positive effect on quality is strongest in the most productive countries. Our findings contribute to the literature on the poverty trap: we argue that improving the quality of financial institutions alone is unlikely to boost quality or lower prices of the poorest countries. | 595 CHOI and LUGOVSKYYcomplementarities between different inputs-capital, labor productivity, and entrepreneurial talentin the production function of quality. Building on Verhoogen (2008), we employ a discrete choice model, where the production function of quality contains the elements of O-ring technology (Kremer, 1993). We extend it in two important dimensions: first, we introduce the liquidity constraints of exporting firms in the model and assume that the cost of borrowing decreases in FD. 4 Second, in line with the labor search literature, 5 we assume a positive correlation between labor productivity and entrepreneurial talent across countries.The model provides three testable predictions: (i) controlling for quality, better FD decreases export prices; (ii) FD has a positive effect on export quality, and more so in countries with higher labor productivity, and (iii) for sufficiently large parameter regulating the share of capital in the production function, the effect of FD on export prices is U-shaped in labor productivity.The first effect is the most straightforward: given the same set of inputs, a lower cost of borrowing reduces the total cost and sequentially the price. The second effect is due to the super-modularity of the production function of quality in inputs. As a result, any reduction in the variable production cost-including lower borrowing costs owing to better developed financi...

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“… There are other models in the literature, in which firms borrow to cover their variable costs (e.g., Besedeš, Kim, & Lugovskyy, ; Chor & Manova, ; Feenstra, Li, & Yu, ). …”

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confidence: 99%

Asymmetric effects of financial development on export price and quality across countries

Choi

Lugovskyy

2019

Rev International Economics

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“…Other research focuses on credit constraints on the growth of exports at the micro level. For example, Besedes, Kim, and Lugoskyy () show that credit constraints play a key role in early stages of exporting but not in later stages. Similarly, Jarreau and Poncet () show that credit constraints affect the sectoral composition of exports.…”

Section: Literature Reviewmentioning

confidence: 99%

Impact of bank credit on exports to Association of South East Asian Nations countries: Empirical study of Vietnam

Trần

Nguyen

Nguyễn³

et al. 2019

Asia & Pacific Policy Stud

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Using 2012 and 2016 input-output tables, the paper aims to assess the dispersion effects of bank credit on value added created by exporting activities of 17 sectors from Vietnam to Association of South East Asian Nations (ASEAN) countries. The research contributes to the literature with respect to the role of the banks on providing credit to export in developing countries. Despite the increasing demand for export credit to ASEAN countries in the period of 2013-2017, Vietnamese export credit only accounted for roughly 30% of total credit. The research results indicate that capital requirements for exporting are always higher than other activities and keep growing during the recent period. It shows the importance of bank loans for exporting activities in Vietnam. Moreover, according to the research, exports to ASEAN countries have greater dispersion impact than exporting to other countries, and capital requirements for exporting to ASEAN countries are also higher. This implies bank credit for exporting activities to ASEAN countries should be encouraged. As a result of empirical evidence regarding the power of dispersion and level of value added induced by the increase of final demand, the study recommends that Vietnam should pay more attention to potential target

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“…() and Besedes et al. () use the traditional measures of financial needs and show that finance promotes export survival. Jaud et al.…”

Section: Introductionmentioning

confidence: 99%

“…Besedes et al. () and Jaud et al. () also look at the long‐term impact of finance on international trade.…”

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Financial Development and Sustainable Exports: Evidence from Firm‐product Data

2014

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We combine a novel measure of export-related financial needs at the product level with a unique database of firm-product export data (including names of the exporting firms) from five developing countries. Using the tools of survival analysis and taking into account firms' and products' heterogeneity, we then examine the impact of financial development on the long-term trade. Finance matters for sustainable export performance, as goods with higher export-related financial needs disproportionately benefit from better financial development. Our results complement existing literature on finance and trade, which has relied on production-based measures of financial dependence at the industry or firm level. Terms of use: Documents in EconStor mayJEL-Code: F100, G100, O160.

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Export Growth and Credit Constraints

Cited by 24 publications

References 39 publications

Asymmetric effects of financial development on export price and quality across countries

Asymmetric effects of financial development on export price and quality across countries

Impact of bank credit on exports to Association of South East Asian Nations countries: Empirical study of Vietnam

Financial Development and Sustainable Exports: Evidence from Firm‐product Data

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