Harmful Pro-Competitive Effects of Trade in Presence of Credit Market Frictions

Reto Foellmi and Manuel Oechslin

No 13538, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We explore the consequences of international trade in an economy that encompasses technology choice and an endogenous distribution of mark-ups due to credit market frictions. We show that in such an environment a gradual opening of trade may -- but not necessarily must -- have a negative impact on productivity and overall output. The reason is that the pro-competitive effects of trade reduce mark-ups and hence make access to credit more difficult for smaller firms. As a result, smaller firms -- while not driven out of the market -- may be forced to switch to less productive technologies.

Keywords: International trade; Credit market frictions; Productivity; Polarization (search for similar items in EconPapers)
JEL-codes: F13 O11 O16 (search for similar items in EconPapers)
Date: 2019-02
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP13538 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Harmful Procompetitive Effects of Trade in Presence of Credit Market Frictions (2020)
Working Paper: Harmful Pro-Competitive Effects of Trade in Presence of Credit Market Frictions (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:13538

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP13538

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().