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Export price adjustments under financial constraints

Abstract

Exploiting data on product-destination level transactions of a large panel of Italian firms, we provide new evidence on the effect of financial constraints on price variation across exporters. Controlling for firm characteristics and endogeneity, constrained exporters charge higher prices than unconstrained firms exporting in the same product-destination market. The positive price difference increases with horizontal differentiation of products, while it reduces in vertically differentiated products, where there is more scope for quality adjustments. The results are consistent with constrained firms exploiting demand rigidities to keep prices up in the attempt to sustain revenues and escape the constraints.

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File URL: ftp://mse.univ-paris1.fr/pub/mse/CES2013/13057R.pdf
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Paper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number 13057r.

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Length: 38 pages
Date of creation: Jul 2013
Date of revision: Jan 2014
Handle: RePEc:mse:cesdoc:13057r
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Keywords: Financial constraints; export prices; horizontal and vertical differentiation; quality adjustment.;

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Find related papers by JEL classification:
  • F10 - International Economics - - Trade - - - General
  • F14 - International Economics - - Trade - - - Empirical Studies of Trade
  • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
  • G20 - Financial Economics - - Financial Institutions and Services - - - General
  • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
  • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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Cited by:

  1. Eckel, Carsten & Unger, Florian, 2015. "Credit constraints, endogenous innovations, and price setting in international trade," Discussion Papers in Economics 24858, University of Munich, Department of Economics.
  2. 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, vol. 25(5), pages 813-827.
  3. ByeongHwa Choi & Volodymyr Lugovskyy, 2015. "Positive and Negative Effects of Financial Development on Export Prices," Caepr Working Papers 2015-020 Classification-F, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  4. Crinò, Rosario & Ogliari, Laura, 2015. "Financial Frictions, Product Quality, and International Trade," CEPR Discussion Papers 10555, C.E.P.R. Discussion Papers.
  5. Valeria Gattai, 2015. "Internationalisation and performance at the firm-level: what we learn from Italy," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 42(4), pages 475-509, December.
  6. repec:eee:ecosys:v:41:y:2017:i:1:p:41-51 is not listed on IDEAS
  7. Valeria Gattai, 2015. "Foreign exposure and heterogeneous performance of Italian firms: A survey of the empirical literature (1992-2014)," Working Papers 300, University of Milano-Bicocca, Department of Economics, revised Apr 2015.

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