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Asymmetric effects of financial development on export price and quality across countries

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  • ByeongHwa Choi
  • Volodymyr Lugovskyy

Abstract

We derive two novel predictions: financial development has a more pronounced effect on quality in countries with greater labor productivity, and its effect on export prices is U‐shaped in labor productivity. We confirm our predictions empirically and show that the negative effect of financial development on export prices is greatest in middle‐productivity countries, while its positive effect on quality is strongest in the most productive countries. Our findings contribute to the literature on the poverty trap: we argue that improving the quality of financial institutions alone is unlikely to boost quality or lower prices of the poorest countries.

Suggested Citation

  • ByeongHwa Choi & Volodymyr Lugovskyy, 2019. "Asymmetric effects of financial development on export price and quality across countries," Review of International Economics, Wiley Blackwell, vol. 27(2), pages 594-642, May.
    • Handle: RePEc:bla:reviec:v:27:y:2019:i:2:p:594-642
    DOI: 10.1111/roie.12390
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    Cited by:

    1. Chen, Meng-Wei & Lu, Cuicui & Tian, Yuan, 2021. "Export price and quality adjustment: The role of financial stress and exchange rate," Economic Modelling, Elsevier, vol. 96(C), pages 336-345.
    2. Xiaoxin Ma & Qiang Fu, 2020. "The Influence of Financial Development on Energy Consumption: Worldwide Evidence," IJERPH, MDPI, vol. 17(4), pages 1-15, February.
    3. Gideon Ndubuisi & Solomon Owusu, 2021. "How important is GVC participation to export upgrading?," The World Economy, Wiley Blackwell, vol. 44(10), pages 2887-2908, October.
    4. Zhongye Sun & Xin Zhang & Yifei Gao, 2023. "The Impact of Financial Development on Renewable Energy Consumption: A Multidimensional Analysis Based on Global Panel Data," IJERPH, MDPI, vol. 20(4), pages 1-20, February.
    5. Dongmin Kong & Mengxu Xiong, 2021. "Unintended consequences of tax incentives on export product quality: Evidence from a natural experiment in China," Review of International Economics, Wiley Blackwell, vol. 29(4), pages 802-837, September.
    6. Choi, ByeongHwa, 2023. "The impact of financial development on innovation-based exports: Do all firms benefit equally?," The Quarterly Review of Economics and Finance, Elsevier, vol. 88(C), pages 81-100.

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