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Financial Frictions and Export Dynamics

  • Michal Szkup

    (New York University)

  • Fernando Leibovici

    (New York University)

  • David Kohn

    (New York University)

This paper studies the relationship between firm export dynamics and financial constraints in a small open economy model. Robust findings in the literature show that new exporters begin by exporting very small quantities, with most of them exiting the foreign market soon after. However, those that survive expand very rapidly and are much less likely to exit. As reported by Ruhl and Willis (2008a), standard trade models with heterogeneous firms cannot replicate these facts. We add borrowing constraints to an otherwise standard model and calibrate it using microdata on export dynamics. We find that financial constraints can largely account for the decreasing hazard rate and the increasing export volume of new exporters. We then provide empirical evidence supporting this mechanism and study its implications for understanding the effects of a large devaluation on aggregate exports.

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Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 1014.

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Date of creation: 2011
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Handle: RePEc:red:sed011:1014
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  1. Gian Luca Clementi & Hugo Hopenhayn, . "A Theory of Financing Constraints and Firm Dynamics," GSIA Working Papers 2002-E9, Carnegie Mellon University, Tepper School of Business.
  2. Till Gross & Stephane Verani, 2012. "Financing Constraints, Firm Dynamics, and International Trade," 2012 Meeting Papers 1035, Society for Economic Dynamics.
  3. Flora Bellone & Patrick Musso & Lionel Nesta & Stefano Schiavo, 2010. "Financial Constraints and Firm Export Behaviour," The World Economy, Wiley Blackwell, vol. 33(3), pages 347-373, 03.
  4. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
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  6. Costas Arkolakis, 2009. "A Unified Theory of Firm Selection and Growth," CESifo Working Paper Series 2679, CESifo Group Munich.
  7. Costas Arkolakis, 2008. "Market Penetration Costs and the New Consumers Margin in International Trade," NBER Working Papers 14214, National Bureau of Economic Research, Inc.
  8. Greenaway, David & Guariglia, Alessandra & Kneller, Richard, 2007. "Financial factors and exporting decisions," Journal of International Economics, Elsevier, vol. 73(2), pages 377-395, November.
  9. Fernando Leibovici, 2013. "Financial Development and International Trade," 2013 Meeting Papers 532, Society for Economic Dynamics.
  10. Vicente Cunat & Andrea Caggese, 2011. "Financing Constraints, Firm Dynamics, Export Decisions, and Aggregate productivity," 2011 Meeting Papers 187, Society for Economic Dynamics.
  11. Berman, Nicolas & Héricourt, Jérôme, 2010. "Financial factors and the margins of trade: Evidence from cross-country firm-level data," Journal of Development Economics, Elsevier, vol. 93(2), pages 206-217, November.
  12. Jonathan Eaton, Marcela Eslava, Maurice Kugler,James Tybout, 1970. "Export Dynamics in Colombia: Firm-Level Evidence," Working Papers eg0036, Wilfrid Laurier University, Department of Economics, revised 1970.
  13. Minetti, Raoul & Zhu, Susan Chun, 2011. "Credit constraints and firm export: Microeconomic evidence from Italy," Journal of International Economics, Elsevier, vol. 83(2), pages 109-125, March.
  14. Blum, Bernardo S. & Claro, Sebastian & Horstmann, Ignatius J., 2013. "Occasional and perennial exporters," Journal of International Economics, Elsevier, vol. 90(1), pages 65-74.
  15. Blundell, Richard & Meghir, Costas & Neves, Pedro, 1993. "Labour supply and intertemporal substitution," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 137-160, September.
  16. Alessandria, George & Choi, Horag, 2014. "Establishment heterogeneity, exporter dynamics, and the effects of trade liberalization," Journal of International Economics, Elsevier, vol. 94(2), pages 207-223.
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