TY  - JOUR
AU  - Manova,Kalina
TI  - Credit Constraints, Heterogeneous Firms, and International Trade  
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14531
PY  - 2008
Y2  - December 2008
UR  - http://www.nber.org/papers/w14531
L1  - http://www.nber.org/papers/w14531.pdf
N1  - Author contact info:
Kalina Manova
Department of Economics
Stanford University
579 Serra Mall
Stanford, CA 94305
Tel: 650/725-9967
Fax: 650/725-5702
E-Mail: manova@stanford.edu
AB  - This paper examines the detrimental consequences of financial market imperfections for international trade. I develop a heterogeneous-firm model with countries at different levels of financial development and sectors of varying financial vulnerability. Applying this model to aggregate trade data, I study the mechanisms through which credit constraints operate. First, financial development increases countries' exports above and beyond its impact on overall production. Firm selection into exporting accounts for a third of the trade-specific effect, while two thirds are due to reductions in firm-level exports. Second, financially advanced economies export a wider range of products and their exports experience less product turnover. Finally, while all countries service large destinations, exporters with superior financial institutions have more trading partners and also enter smaller markets. All of these effects are magnified in financially vulnerable sectors. These results have important policy implications for less developed economies that rely on exports for economic growth but suffer from poor financial contractibility.
ER  -