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Financing Constraints, Firm Dynamics, Export Decisions, and Aggregate Productivity

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  • Andrea Caggese

    (Universitat Pompeu Fabra)

  • Vicente Cunat

    (London School of Economics)

Abstract

We present a dynamic model in which firms accumulate wealth to avoid bankruptcy and to overcome financing constraints that affect their fixed operational costs and the costs of becoming an exporter. Financing constraints not only affect firms directly when they are binding, but also indirectly, through precautionary saving and the selection of firms via entry and exit of the domestic and export markets. We calibrate the model and test some of its predictions using a rich dataset of Italian manufacturing firms for the period 1995-2003. Financing constraints reduce the aggregate productivity gains induced by trade liberalization by 25 percent by distorting the incentives of the most productive firms to self-select into exporting. (Copyright: Elsevier)

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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 16 (2013)
Issue (Month): 1 (January)
Pages: 177-193

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Handle: RePEc:red:issued:11-37

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Keywords: Financing constraints; Firm dynamics; Exports; Productivity;

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References

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Citations

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Cited by:
  1. Daniela Federici & Valentino Parisi, 2012. "Corporate Taxation and Exports," Working Papers 2012-01, Universita' di Cassino, Dipartimento di Scienze Economiche.
  2. Wagner, Joachim, 2013. "Credit constraints and exports: A survey of empirical studies using firm level data," Working Paper Series in Economics and Institutions of Innovation 334, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  3. Strasser, Georg, 2013. "Exchange rate pass-through and credit constraints," Journal of Monetary Economics, Elsevier, vol. 60(1), pages 25-38.
  4. Wagner, Joachim, 2012. "Credit constraints and exports: Evidence for German manufacturing enterprises," Working Paper Series in Economics and Institutions of Innovation 286, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  5. Silvio Contessi & Francesca de Nicola, 2012. "What do we know about the relationship between access to finance and international trade?," Working Papers 2012-054, Federal Reserve Bank of St. Louis.
  6. Mirabelle Muûls, 2012. "Exporters, Importers and Credit Constraints," CEP Discussion Papers dp1169, Centre for Economic Performance, LSE.

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