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Financing time to trade : Evidence from French firms

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  • Pauline Bourgeon

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, Banque de France - -)

  • Jean-Charles Bricongne

    ()
    (Banque de France - -)

  • Guillaume Gaulier

    ()
    (Banque de France - -)

Abstract

Using a very detailed set of French firms' data on trade flows and balance sheets, this paper analyses to what extent firms' financial frictions, considered as the interaction of financial dependence and financial constraints, and trading time affect their trade flows. In this empirical study the main indicator taken for firm's financial constraint, namely payment incident occurring at firm's partner is exogenous, whereas "traditional" financial indicators in other studies are not. The notion of trading time encompasses the whole time-lag between the production of export goods and the receiving of the revenues generated by these exports (time in transit, time at borders, etc.). In estimations, we both use distance as a proxy and a precise indicator computed by adding shipping time and average time spent at borders (only available for a sub-sample of extra-EU countries). The empirical results obtained so bring evidence that trading time amplifies the negative effect of financial restrictions on trade. By computing the marginal effect of financial constraint over bilateral trade we confirm that it represents a significant barrier to export for destinations beyond 3500 kilometers away.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00677343.

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Date of creation: Mar 2012
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Handle: RePEc:hal:cesptp:halshs-00677343

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Keywords: Distance interaction; financial frictions; gravity equations; trade patterns; trading time.;

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