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Export quality upgrading under credit constraints

This paper studies whether credit constraints affect the decision of small and medium size enterprises (SMEs) to upgrade the quality of their exported output with respect to the one sold domestically. We use a detailed firm-level data-set on Italian SMEs reporting information on output characteristics, credit rationing and international activities. Employing .rm credit scores used by banks for their lending decisions, we assess how credit constraints affect export quality upgrading. First, we find that exporting firms are less likely to upgrade output quality, when their credit score worsens. A one standard deviation worsening in the credit score lowers the probability of quality upgrading by more than 35 percent. Second, firms exporting to distant markets cut quality upgrading more sharply when their score worsens. The negative impact of credit constraints is confirmed when taking into account firm heterogeneity in size and other relevant .rm attributes. The main result is robust to endogeneity considerations of the credit score. Overall, our findings suggest that, by impacting export quality upgrading, credit constraints may affect the intensive margin of trade.
Year of publication:
2015
Authors: Ciani, Andrea ; Bartoli, Francesca
Publisher: Düsseldorf : Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)
Subject: Credit Constraints | Product Quality | Distance | International Trade
Series:
Type of publication: Book / Working Paper
Type of publication (narrower categories): Working Paper
Language: English
ISBN: 978-3-86304-190-8
Other identifiers:
832183458 [GVK]
hdl:10419/112742 [Handle]
RePEc:zbw:dicedp:191 [RePEc]
Classification: F10 - Trade. General ; F14 - Country and Industry Studies of Trade ; L15 - Information and Product Quality; Standardization and Compatibility ; G20 - Financial Institutions and Services. General ; G32 - Financing Policy; Capital and Ownership Structure
Source:
Persistent link: https://ebvufind01.dmz1.zbw.eu/10011298720
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