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

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  • Zhiyuan Li
  • Miaojie Yu

Abstract

Recent Melitz-type (2003) intra-industry heterogonous trade models argue that a firm fs productivity has significant effects on the firm fs exports. This paper examines how a firm fs credit constraints as well as its productivity affect its export decisions. We imbed the firm fs 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," Global COE Hi-Stat Discussion Paper Series gd09-098, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hst:ghsdps:gd09-098
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. Yanrui Wu, 2012. "R&D Behaviour in Chinese Firms," Economics Discussion / Working Papers 12-26, The University of Western Australia, Department of Economics.
    3. Miaojie Yu, 2010. "Processing Trade, Firm's Productivity, and Tariff Reductions : Evidence from Chinese Products," Macroeconomics Working Papers 22799, East Asian Bureau of Economic Research.
    4. 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.
    5. 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.
    6. Almila Burgac Cil & Fikret Dulger, 2018. "Financial Constraints, Firm Characteristics and Exports: Evidence from Turkish Manufacturing Firms," International Journal of Economics and Financial Issues, Econjournals, vol. 8(1), pages 168-174.
    7. 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.

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    More about this item

    Keywords

    Credit Constraints; Heterogeneous Firms; Productivity; Trade;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F3 - International Economics - - International Finance
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • G2 - Financial Economics - - Financial Institutions and Services

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