Advanced Search
MyIDEAS: Login to save this paper or follow this series

Finance, comparative advantage, and resource allocation

Contents:

Author Info

  • Jaud, Melise
  • Kukenova, Madina
  • Strieborny, Martin

Abstract

The authors show that exported products exit the US market sooner if they violate the Heckscher-Ohlin notion of comparative advantage. Crucially, this pattern is stronger when exporting country has a well-developed banking system, measured by a high ratio of bank credit over the GDP. Banks thus push firms away from exports that are facing an uphill battle on a competitive foreign market due to a suboptimal use of the domestic factor endowment. The results imply a disciplining role for bank credit in terminating inefficient trade flows. This constitutes a new channel through which finance improves resource allocation in the real economy.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2012/06/29/000158349_20120629114930/Rendered/PDF/WPS6111.pdf
Download Restriction: no

Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6111.

as in new window
Length:
Date of creation: 01 Jun 2012
Date of revision:
Handle: RePEc:wbk:wbrwps:6111

Contact details of provider:
Postal: 1818 H Street, N.W., Washington, DC 20433
Phone: (202) 477-1234
Email:
Web page: http://www.worldbank.org/
More information through EDIRC

Related research

Keywords: Markets and Market Access; Economic Theory&Research; Banks&Banking Reform; Debt Markets; Inequality;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Chang-Tai Hsieh & Peter Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," Working Papers, Center for Economic Studies, U.S. Census Bureau 09-04, Center for Economic Studies, U.S. Census Bureau.
  2. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, American Economic Association, vol. 76(2), pages 323-29, May.
  3. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2003. "Survival of the Best Fit: Exposure to Low-Wage Countries and the (Uneven) Growth of U.S. Manufacturing Plants," CEP Discussion Papers, Centre for Economic Performance, LSE dp0584, Centre for Economic Performance, LSE.
  4. Deardorff, Alan V., 1979. "Weak links in the chain of comparative advantage," Journal of International Economics, Elsevier, Elsevier, vol. 9(2), pages 197-209, May.
  5. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2006. "Robust Inference with Multi-way Clustering," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0327, National Bureau of Economic Research, Inc.
  6. Ricardo Hausmann & Jason Hwang & Dani Rodrik, 2007. "What you export matters," Journal of Economic Growth, Springer, Springer, vol. 12(1), pages 1-25, March.
  7. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2007. "Comparative Advantage and Heterogeneous Firms," Review of Economic Studies, Oxford University Press, vol. 74(1), pages 31-66.
  8. Hart, Oliver & Moore, John, 1995. "Debt and Seniority: An Analysis of the Role of Hard Claims in Constraining Management," American Economic Review, American Economic Association, American Economic Association, vol. 85(3), pages 567-85, June.
  9. Shleifer, Andrei & Vishny, Robert W, 1997. " A Survey of Corporate Governance," Journal of Finance, American Finance Association, American Finance Association, vol. 52(2), pages 737-83, June.
  10. Cadot, Olivier & Carrère, Céline & Strauss-Kahn, Vanessa, 2010. "Export Diversification: What's behind the Hump?," CEPREMAP Working Papers (Docweb), CEPREMAP 1011, CEPREMAP.
  11. Larry Lang & Eli Ofek & Rene M. Stulz, 1995. "Leverage, Investment, and Firm Growth," NBER Working Papers 5165, National Bureau of Economic Research, Inc.
  12. Raddatz, Claudio, 2006. "Liquidity needs and vulnerability to financial underdevelopment," Journal of Financial Economics, Elsevier, Elsevier, vol. 80(3), pages 677-722, June.
  13. Raghuram G. Rajan & Luigi Zingales, . "Financial Dependence and Growth," CRSP working papers, Center for Research in Security Prices, Graduate School of Business, University of Chicago 344, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  14. Xiang, Chong, 2007. "Diversification cones, trade costs and factor market linkages," Journal of International Economics, Elsevier, Elsevier, vol. 71(2), pages 448-466, April.
  15. Holger Görg & Michael Henry & Eric Strobl, 2008. "Grant Support and Exporting Activity," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 168-174, February.
  16. Mion, Giordano & Opromolla, Luca David, 2011. "Managers' Mobility, Trade Status, and Wages," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8230, C.E.P.R. Discussion Papers.
  17. Mélise Jaud & Madina Kukenova & Martin Strieborny, 2009. "Financial dependence and intensive margin of trade," PSE Working Papers, HAL halshs-00575005, HAL.
  18. repec:hal:wpaper:halshs-00575005 is not listed on IDEAS
  19. Peter K. Schott, 2001. "One Size Fits All? Heckscher-Ohlin Specialization in Global Production," NBER Working Papers 8244, National Bureau of Economic Research, Inc.
  20. Tibor Besedes & Thomas J. Prusa, 2007. "The Role of Extensive and Intensive Margins and Export Growth," NBER Working Papers 13628, National Bureau of Economic Research, Inc.
  21. Besedes, Tibor & Prusa, Thomas J., 2006. "Product differentiation and duration of US import trade," Journal of International Economics, Elsevier, Elsevier, vol. 70(2), pages 339-358, December.
  22. Beck, Thorsten, 2001. "Financial dependence and international trade," Policy Research Working Paper Series, The World Bank 2609, The World Bank.
  23. Beck, Thorsten, 2002. "Financial development and international trade: Is there a link?," Journal of International Economics, Elsevier, Elsevier, vol. 57(1), pages 107-131, June.
  24. John Romalis, 2004. "Factor Proportions and the Structure of Commodity Trade," American Economic Review, American Economic Association, American Economic Association, vol. 94(1), pages 67-97, March.
  25. Peter K. Schott, 2004. "Across-product Versus Within-product Specialization in International Trade," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 119(2), pages 646-677, May.
  26. Volpe Martincus, Christian & Carballo, Jerónimo, 2008. "Is export promotion effective in developing countries? Firm-level evidence on the intensive and the extensive margins of exports," Journal of International Economics, Elsevier, Elsevier, vol. 76(1), pages 89-106, September.
  27. Gaulier, Guillaume & Zignago, Soledad, 2004. "Notes on BACI (analytical database of international trade). 1989-2002 version," MPRA Paper 32401, University Library of Munich, Germany.
  28. Jiandong Ju & Shang-Jin Wei, 2005. "Endowment Versus Finance," IMF Working Papers, International Monetary Fund 05/123, International Monetary Fund.
  29. Greenaway, David & Guariglia, Alessandra & Kneller, Richard, 2007. "Financial factors and exporting decisions," Journal of International Economics, Elsevier, Elsevier, vol. 73(2), pages 377-395, November.
  30. Jeffrey Wurgler, 1999. "Financial Markets And The Allocation Of Capital," Yale School of Management Working Papers, Yale School of Management ysm123, Yale School of Management, revised 01 Mar 2001.
  31. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2002. "How Much Should We Trust Differences-in-Differences Estimates?," NBER Working Papers 8841, National Bureau of Economic Research, Inc.
  32. Stulz, ReneM., 1990. "Managerial discretion and optimal financing policies," Journal of Financial Economics, Elsevier, Elsevier, vol. 26(1), pages 3-27, July.
  33. Michael C. Jensen, 1994. "The Modern Industrial Revolution, Exit, And The Failure Of Internal Control Systems," Journal of Applied Corporate Finance, Morgan Stanley, Morgan Stanley, vol. 6(4), pages 4-23.
  34. Tibor Besedes & Thomas Prusa, 2006. "Ins, outs, and the duration of trade," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 39(1), pages 266-295, February.
  35. Tibor Besedeš & Byung–Cheol Kim & Volodymyr Lugovskyy, 2011. "Export Growth and Credit Constraints," CeFiG Working Papers, Center for Firms in the Global Economy 16, Center for Firms in the Global Economy, revised 16 Oct 2011.
  36. Andrew B. Bernard & Stephen Redding & Peter K. Schott, 2010. "Multiple-product firms and product switching," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 27861, London School of Economics and Political Science, LSE Library.
  37. Blanchard, Olivier Jean & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 1994. "What do firms do with cash windfalls?," Journal of Financial Economics, Elsevier, Elsevier, vol. 36(3), pages 337-360, December.
  38. Ju, Jiandong & Wei, Shang-Jin, 2005. "Endowment Versus Finance: A Wooden Barrel Theory of International Trade," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5109, C.E.P.R. Discussion Papers.
  39. Kalina Manova, 2008. "Credit Constraints, Heterogeneous Firms, and International Trade," NBER Working Papers 14531, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Kukenova, Madina, 2011. "Financial liberalization and allocative dfficiency of capital," Policy Research Working Paper Series, The World Bank 5670, The World Bank.
  2. David VanHoose, 2013. "A Model of International Trade in Banking Services," Open Economies Review, Springer, Springer, vol. 24(4), pages 613-625, September.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:6111. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.