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Financial factors and the margins of trade : evidence from cross-country firm-level data

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Abstract

Using a large cross-country, firm level database containing 5,000 firms in 9 developing and emerging economies, we study how financial factors affect both firms' export decisions and the amount exported by firm. First, our results stress an important impact of firms' access to finance on their entry decision into the export market. However, a better financial health neither increases the probability of remaining and exporter once the firm has entered, not the size of exports. Second, we find that financial constraints create a disconnection between firms' productivity and their export status : productivity is a significant determinant of exporting decision only if the firm has a sufficient access to external finance. Finally, an increase in a country's financial development dampens this disconnection, thus acting positively both on the number of exporters and on the exporters' selection process.

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File URL: ftp://mse.univ-paris1.fr/pub/mse/CES2008/Bla08050.pdf
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Paper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number bla08050.

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Length: 35 pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:mse:cesdoc:bla08050

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Keywords: Export decision; margins of trade; financial constraints.;

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