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Financial Factors and the Margins of Trade: Evidence from Cross-Country Firm-Level Data

Author

Listed:
  • Nicolas Berman

    () (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, EUI - European University Institute)

  • Jérôme Héricourt

    () (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, EQUIPPE - Economie Quantitative, Intégration, Politiques Publiques et Econométrie - Université de Lille, Droit et Santé - PRES Université Lille Nord de France - Université de Lille, Sciences Humaines et Sociales - Université de Lille, Sciences et Technologies)

Abstract

Using a large cross-country, firm level database containing 5,000 firms in 9 developing and emerging economies, we study how financial factors affect both firms' export decisions and the amount exported by firm. First, our results stress an important impact of firms' access to finance on their entry decision into the export market. However, a better financial health neither increases the probability of remaining an exporter once the firm has entered, nor the size of exports. Second, we find that financial constraints create a disconnection between firms' productivity and their export status: productivity is a significant determinant of exporting decision only if the firm has a sufficient access to external finance. Finally, an increase in a country's financial development dampens this disconnection, thus acting positively both on the number of exporters and on the exporters' selection process. These results contribute to the literature documenting the role of fixed cost and of the extensive margin of trade in total trade adjustment, and provide micro evidence of the positive impact of financial development on trade found by previous literature.

Suggested Citation

  • Nicolas Berman & Jérôme Héricourt, 2008. "Financial Factors and the Margins of Trade: Evidence from Cross-Country Firm-Level Data," Post-Print halshs-00321632, HAL.
  • Handle: RePEc:hal:journl:halshs-00321632
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00321632
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Export decision; margins of trade; financial constraints; Décision d'exporter; marges de commerce; contraintes financières;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F0 - International Economics - - General
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing

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