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Exports and Credit Constraints under Incomplete Information: Theory and Evidence from China

Author

Listed:
  • Robert C. Feenstra

    (University of California-Davis and NBER)

  • Zhiyuan Li

    (Shanghai University of Finance and Economics and Key Laboratory of Mathematical Economics (SUFE))

  • Miaojie Yu

    (China Center for Economic Research, Peking University)

Abstract

This paper examines why credit constraints for domestic and exporting firms arise in a setting where banks do not observe firms' productivities. To maintain incentive compatibility, banks lend below the amount that firms need for optimal production. The longer time needed for export shipments induces a tighter credit constraint on exporters than on purely domestic firms. In our application to Chinese firms, we find that the credit constraint is more stringent as a firm's export share grows, as the time to ship for exports is lengthened, and as there is greater dispersion of firms' productivities, reflecting more incomplete information. © 2014 The President and Fellows of Harvard College and the Massachusetts Institute of Technology

Suggested Citation

  • Robert C. Feenstra & Zhiyuan Li & Miaojie Yu, 2014. "Exports and Credit Constraints under Incomplete Information: Theory and Evidence from China," The Review of Economics and Statistics, MIT Press, vol. 96(4), pages 729-744, October.
  • Handle: RePEc:tpr:restat:v:96:y:2014:i:4:p:729-744
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    References listed on IDEAS

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    More about this item

    Keywords

    export; credit constraint; China; domestic; bank; firm; productivity;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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