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Exports, Productivity, and Credit Constraints : A Firmâ€ÂLevel Empirical Investigation of China

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Author Info

  • Zhiyuan Li

    (CCER)

  • Miaojie Yu

Abstract

Recent Melitz-type (2003) intra-industry heterogonous trade models argue that a firm's productivity has significant effects on the firm's exports. This paper examines how a firms credit constraints as well as its productivity affect its export decisions. We imbed the firm's credit constraints into a Melitz-type general-equilibrium model by endogenizing the probability of the success of firm-specific projects. We show that, all else equal, it is easier for firms to enter the export market if (1) the probability of the success of their project is higher and consequently they have easier access to external finance from financial intermediaries; or (2) they have alternative sources, other than from financial intermediaries, to obtain funds. We test these theoretical hypotheses using firm-level data from Chinese manufacturing industries and find strong evidence supporting the predictions of the model.

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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Trade Working Papers with number 22888.

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Date of creation: Jan 2009
Date of revision:
Handle: RePEc:eab:tradew:22888

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Related research

Keywords: Credit Constraints; Heterogeneous Firms; productivity; trade;

References

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  1. Yu, Miaojie, 2010. "Trade, democracy, and the gravity equation," Journal of Development Economics, Elsevier, vol. 91(2), pages 289-300, March.
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  4. Lin, Justin Yifu, 2003. "Development Strategy, Viability, and Economic Convergence," Economic Development and Cultural Change, University of Chicago Press, vol. 51(2), pages 276-308, January.
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  8. Thomas Chaney, 2007. "Liquidity Constrained Exporters," 2007 Meeting Papers 979, Society for Economic Dynamics.
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  10. D. Qiu, Larry, 1999. "Credit Rationing and Patterns of New Product Trade," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 14, pages 75-95.
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  12. Kleibergen, Frank & Paap, Richard, 2006. "Generalized reduced rank tests using the singular value decomposition," Journal of Econometrics, Elsevier, vol. 133(1), pages 97-126, July.
  13. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-97, November.
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  15. Harrison, Ann E. & McMillan, Margaret S., 2003. "Does direct foreign investment affect domestic credit constraints?," Journal of International Economics, Elsevier, vol. 61(1), pages 73-100, October.
  16. Claustre Bajona & Tianshu Chu, 2004. "China's WTO Accession and Its Effect on State-Owned Enterprises," Economics Study Area Working Papers 70, East-West Center, Economics Study Area.
  17. Carsten A. Holz, 2004. "China's Statistical System in Transition: Challenges, Data Problems, and Institutional Innovations," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 50(3), pages 381-409, 09.
  18. Gary Jefferson & Thomas Rawski & Yifan Zhang, 2008. "Productivity growth and convergence across China's industrial economy," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 6(2), pages 121-140.
  19. Héricourt, Jérôme & Poncet, Sandra, 2009. "FDI and credit constraints: Firm-level evidence from China," Economic Systems, Elsevier, vol. 33(1), pages 1-21, March.
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Cited by:
  1. Yang, Qing Gong & Temple, Paul, 2012. "Reform and competitive selection in China: An analysis of firm exits," Structural Change and Economic Dynamics, Elsevier, vol. 23(3), pages 286-299.

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