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Exports, Productivity, and Credit Constraints : A Firm†Level Empirical Investigation of China

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  • Zhiyuan Li

    (CCER)

  • Miaojie Yu

Abstract

Recent Melitz-type (2003) intra-industry heterogonous trade models argue that a firm's productivity has significant effects on the firm's exports. This paper examines how a firms credit constraints as well as its productivity affect its export decisions. We imbed the firm's credit constraints into a Melitz-type general-equilibrium model by endogenizing the probability of the success of firm-specific projects. We show that, all else equal, it is easier for firms to enter the export market if (1) the probability of the success of their project is higher and consequently they have easier access to external finance from financial intermediaries; or (2) they have alternative sources, other than from financial intermediaries, to obtain funds. We test these theoretical hypotheses using firm-level data from Chinese manufacturing industries and find strong evidence supporting the predictions of the model.

Suggested Citation

  • Zhiyuan Li & Miaojie Yu, 2009. "Exports, Productivity, and Credit Constraints : A Firm†Level Empirical Investigation of China," Trade Working Papers 22888, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:tradew:22888
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    References listed on IDEAS

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    3. Angelo Secchi & Federico Tamagni & Chiara Tomasi, 2011. "Exporting under financial constraints: margins, switching dynamics and prices," LEM Papers Series 2011/24, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    4. Angelo Secchi & Federico Tamagni & Chiara Tomasi, 2016. "Financial constraints and firm exports: accounting for heterogeneity, self-selection, and endogeneity," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 25(5), pages 813-827.
    5. Li Junjiang & Hou Lei & Zhang Jiarui, 2011. "Capital endowment, credit constraint and FDI: Analysis based on heterogeneous firms," Frontiers of Economics in China, Springer;Higher Education Press, vol. 6(1), pages 55-75, March.
    6. Angelo Secchi & Federico Tamagni & Chiara Tomasi, 2016. "Export price adjustments under financial constraints," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 49(3), pages 1057-1085, August.
    7. Goenner, Cullen F. & Lee, Kwan Yong, 2022. "The capital structure of domestic and foreign denominated debt: Firm-level evidence from South Korea," International Review of Financial Analysis, Elsevier, vol. 83(C).
    8. Yang, Qing Gong & Temple, Paul, 2012. "Reform and competitive selection in China: An analysis of firm exits," Structural Change and Economic Dynamics, Elsevier, vol. 23(3), pages 286-299.
    9. Cheng, Hua & Wang, Ziqi & Peng, Dan & Kong, Qunxi, 2020. "Firm’s outward foreign direct investment and efficiency loss of factor price distortion: Evidence from Chinese firms," International Review of Economics & Finance, Elsevier, vol. 67(C), pages 176-188.
    10. Peter H. Egger & Michaela Kesina, 2014. "Financial Constraints and the Extensive and Intensive Margin of Firm Exports: Panel Data Evidence from China," Review of Development Economics, Wiley Blackwell, vol. 18(4), pages 625-639, November.
    11. Amankwah-Amoah, Joseph & Zhang, Hongxu, 2015. "Business failure research," MPRA Paper 67848, University Library of Munich, Germany.

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