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Trade Costs, Financial Constraints, and Firm Performance in Developing Countries

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  • TSENG, ERIC

Abstract

This paper extends on work done in the heterogenous-firms trade literature by addressing both heterogeneity in trade costs at the firm level as well as the existence of financial constraints. These extensions to the heterogenous-firms models are also applied in the context of a developing country. Utilizing a framework that endogenizes technological choice, the analysis shows that falling trade costs and improving credit markets (or less financial constraints) improve firm performance. Also, firm-level trade costs are shown to impact a firm’s ability to enter the export market, implying heterogeneity in trade costs at the firm level. The current results show inconclusive evidence for the effect of industry-level trade costs and financial constraints on the ability to enter the export market, but future additions to the robustness of the data in this working paper will address this issue.

Suggested Citation

  • Tseng, Eric, 2014. "Trade Costs, Financial Constraints, and Firm Performance in Developing Countries," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169786, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea14:169786
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    References listed on IDEAS

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    Keywords

    Financial Economics; International Development; International Relations/Trade; Productivity Analysis;

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