IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper

Finance, Comparative Advantage, and Resource Allocation

  • Jaud, Melise

    ()

  • Kukenova, Madina

    ()

  • Strieborny, Martin

    ()

We show that exported products exit the US market sooner if they violate the Heckscher-Ohlin notion of comparative advantage. Crucially, this pattern is stronger when exporting country has a well-developed banking system, measured by a high ratio of bank credit over the GDP. Banks thus push firms away from exports that are facing an uphill battle on a competitive foreign market due to a suboptimal use of the domestic factor endowment. Our results imply a disciplining role for bank credit in terminating inefficient trade flows. This constitutes a new channel through which finance improves resource allocation in the real economy. Keywords: resource misallocation, finance, comparative advantage, ex- port survival

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.lusem.lu.se/media/kwc/working-papers/kwc-wp-2013-11.pdf
Download Restriction: no

Paper provided by Knut Wicksell Centre for Financial Studies, Lund University in its series Knut Wicksell Working Paper Series with number 2013/11.

as
in new window

Length: 30 pages
Date of creation: 19 Jun 2013
Date of revision:
Handle: RePEc:hhs:luwick:2013_011
Contact details of provider: Postal:
Knut Wicksell Centre for Financial Studies, Lund University School of Economics and Management, P.O. Box 7080, S-220 07 Lund, Sweden

Phone: +46 46-222 32 61
Fax: +46 46-222 34 06
Web page: http://www.lusem.lu.se/kwc

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Chang-Tai Hsieh & Peter J. Klenow, 2007. "Misallocation and Manufacturing TFP in China and India," NBER Working Papers 13290, National Bureau of Economic Research, Inc.
  2. Andrew B. Bernard & Stephen Redding & Peter K. Schott, 2010. "Multiple-product firms and product switching," LSE Research Online Documents on Economics 27861, London School of Economics and Political Science, LSE Library.
  3. Kalina Manova, 2013. "Credit Constraints, Heterogeneous Firms, and International Trade," Review of Economic Studies, Oxford University Press, vol. 80(2), pages 711-744.
  4. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
  5. Olivier Cadot & Céline Carrere & Vanessa Strauss-Khan, 2011. "Export Diversification: What's behind the Hump?," Working Papers halshs-00553597, HAL.
  6. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2003. "Survival of the Best Fit: Exposure to Low-Wage Countries and the (Uneven) Growth of U.S. Manufacturing Plants," CEP Discussion Papers dp0584, Centre for Economic Performance, LSE.
  7. Xiang, Chong, 2007. "Diversification cones, trade costs and factor market linkages," Journal of International Economics, Elsevier, vol. 71(2), pages 448-466, April.
  8. Volpe Martincus, Christian & Carballo, Jerónimo, 2008. "Is export promotion effective in developing countries? Firm-level evidence on the intensive and the extensive margins of exports," Journal of International Economics, Elsevier, vol. 76(1), pages 89-106, September.
  9. Andrei Shleifer & Robert W. Vishny, 1995. "A Survey of Corporate Governance," Harvard Institute of Economic Research Working Papers 1741, Harvard - Institute of Economic Research.
  10. Ju, Jiandong & Wei, Shang-Jin, 2005. "Endowment Versus Finance: A Wooden Barrel Theory of International Trade," CEPR Discussion Papers 5109, C.E.P.R. Discussion Papers.
  11. Peter K. Schott, 2001. "One Size Fits All? Heckscher-Ohlin Specialization in Global Production," NBER Working Papers 8244, National Bureau of Economic Research, Inc.
  12. Oliver Hart & John Moore, 1994. "Debt and Seniority: An Analysis of the Role of Hard Claims in Constraining Management," NBER Working Papers 4886, National Bureau of Economic Research, Inc.
  13. Lang, Larry & Ofek, Eli & Stulz, Rene M., 1996. "Leverage, investment, and firm growth," Journal of Financial Economics, Elsevier, vol. 40(1), pages 3-29, January.
  14. Peter K. Schott, 2004. "Across-Product Versus Within-Product Specialization in International Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 119(2), pages 647-678.
  15. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 249-275.
  16. S.K. Bhutani, 2009. "China and India," India Quarterly: A Journal of International Affairs, , vol. 65(4), pages 383-391, October.
  17. Andrew Bernard & Stephen Redding & Peter Schott, 2004. "Comparative advantage and heterogeneous firms," IFS Working Papers W04/24, Institute for Fiscal Studies.
  18. Besedes, Tibor & Prusa, Thomas J., 2006. "Product differentiation and duration of US import trade," Journal of International Economics, Elsevier, vol. 70(2), pages 339-358, December.
  19. Gaulier, Guillaume & Zignago, Soledad, 2004. "Notes on BACI (analytical database of international trade). 1989-2002 version," MPRA Paper 32401, University Library of Munich, Germany.
  20. Deardorff, Alan V., 1979. "Weak links in the chain of comparative advantage," Journal of International Economics, Elsevier, vol. 9(2), pages 197-209, May.
  21. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2006. "Robust Inference with Multi-way Clustering," NBER Technical Working Papers 0327, National Bureau of Economic Research, Inc.
  22. Olivier J. Blanchard & Florencio Lopez-de-Silane, 1993. "What do Firms do with Cash Windfalls?," NBER Working Papers 4258, National Bureau of Economic Research, Inc.
  23. Thorsten Beck, 2003. "Financial Dependence and International Trade," Review of International Economics, Wiley Blackwell, vol. 11(2), pages 296-316, 05.
  24. Besedeš, Tibor & Kim, Byung-Cheol & Lugovskyy, Volodymyr, 2014. "Export growth and credit constraints," European Economic Review, Elsevier, vol. 70(C), pages 350-370.
  25. Hausmann, Ricardo & Hwang, Jason & Rodrik, Dani, 2005. "What You Export Matters," Working Paper Series rwp05-063, Harvard University, John F. Kennedy School of Government.
  26. Giordano Mion & Luca David Opromolla, 2011. "Managers' Mobility, Trade Status and Wages," CEP Discussion Papers dp1044, Centre for Economic Performance, LSE.
  27. Beck, Thorsten, 2001. "Financial development and international trade : is there a link?," Policy Research Working Paper Series 2608, The World Bank.
  28. Görg, Holger & Henry, Michael & Strobl, Eric, 2008. "Grant support and exporting activity," Open Access Publications from Kiel Institute for the World Economy 4288, Kiel Institute for the World Economy (IfW).
  29. Raghuram G. Rajan & Luigi Zingales, 1996. "Financial Dependence and Growth," NBER Working Papers 5758, National Bureau of Economic Research, Inc.
  30. Jensen, Michael C, 1993. " The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems," Journal of Finance, American Finance Association, vol. 48(3), pages 831-80, July.
  31. Besedes, Tibor & Prusa, Thomas J., 2011. "The role of extensive and intensive margins and export growth," Journal of Development Economics, Elsevier, vol. 96(2), pages 371-379, November.
  32. Jeffrey Wurgler, 1999. "Financial Markets And The Allocation Of Capital," Yale School of Management Working Papers ysm123, Yale School of Management, revised 01 Mar 2001.
  33. Tibor Besedes & Thomas Prusa, 2006. "Ins, outs, and the duration of trade," Canadian Journal of Economics, Canadian Economics Association, vol. 39(1), pages 266-295, February.
  34. Raddatz, Claudio, 2006. "Liquidity needs and vulnerability to financial underdevelopment," Journal of Financial Economics, Elsevier, vol. 80(3), pages 677-722, June.
  35. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, Oxford University Press, vol. 124(4), pages 1403-1448.
  36. Stulz, ReneM., 1990. "Managerial discretion and optimal financing policies," Journal of Financial Economics, Elsevier, vol. 26(1), pages 3-27, July.
  37. Mélise Jaud & Madina Kukenova & Martin Strieborny, 2009. "Financial dependence and intensive margin of trade," PSE Working Papers halshs-00575005, HAL.
  38. repec:hal:wpaper:halshs-00575005 is not listed on IDEAS
  39. John Romalis, 2004. "Factor Proportions and the Structure of Commodity Trade," American Economic Review, American Economic Association, vol. 94(1), pages 67-97, March.
  40. Greenaway, David & Guariglia, Alessandra & Kneller, Richard, 2007. "Financial factors and exporting decisions," Journal of International Economics, Elsevier, vol. 73(2), pages 377-395, November.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:hhs:luwick:2013_011. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Niclas Andrén)

or (Frederik Lundtofte)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.