Export price adjustments under financial constraints.

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.