Poultry in Motion: A Study of International Trade Finance Practices

Pol Antras and C. Fritz Foley

No 17091, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper analyzes the financing terms that support international trade and sheds light on how and why these arrangements affect trade. Using detailed transaction level data from a U.S. based exporter of frozen and refrigerated food products, primarily poultry, it begins by describing broad patterns about the use of alternative financing terms. These patterns help discipline a model in which the trade finance mode is shaped by the risk that an importer defaults on an exporter and by the possibility that an exporter does not deliver goods as specified in the contract. The empirical results indicate that transactions are more likely to occur on cash in advance or letter of credit terms when the importer is located in a country with weak contractual enforcement and in a country that is further from the exporter. Letters of credit, however, are rarely used by the exporter. As an importer develops a relationship with the exporter, transactions are less likely to occur on terms that require prepayment. During the recent crisis, the exporter was more likely to demand cash in advance terms when transacting with new customers, and customers that traded on cash in advance terms prior to the crisis disproportionately reduced their purchases. These results can be rationalized by the model whenever (i) misbehavior on the part of the exporter is of little concern to importers, and (ii) local banks in importing countries are typically more effective than the exporter in pursuing financial claims against importers.

JEL-codes: F1 G0 K12 (search for similar items in EconPapers)
Date: 2011-05
New Economics Papers: this item is included in nep-int
Note: CF ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (53)

Published as Pol Antràs & C. Fritz Foley, 2015. "Poultry in Motion: A Study of International Trade Finance Practices," Journal of Political Economy, University of Chicago Press, vol. 123(4), pages 853 - 901.

Downloads: (external link)
http://www.nber.org/papers/w17091.pdf (application/pdf)

Related works:
Working Paper: Poultry in Motion: A Study of International Trade Finance Practices (2011)
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:nbr:nberwo:17091

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w17091

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().