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Trade and credit reallocation: How banks help shape comparative advantage

Christian Keuschnigg and Michael Kogler

Review of International Economics, 2022, vol. 30, issue 1, 282-305

Abstract: Innovative production is driven by creative destruction. High turnover requires frequent reallocation of capital. Banks play a major role in capital reallocation by withdrawing funds from nonviable firms and redirecting credit to scale up the most productive firms. Structural parameters of the banking system thus affect a country’s comparative advantage in innovative sectors. Using a Heckscher–Ohlin model with banks, this paper shows how insolvency laws, investor protection, and bank capital regulation shape reallocation, specialization, and trade patterns.

Date: 2022
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https://doi.org/10.1111/roie.12564

Related works:
Working Paper: Trade and Credit Reallocation: How Banks Help Shape Comparative Advantage (2018) Downloads
Working Paper: Trade and Credit Reallocation: How Banks Help Shape Comparative Advantage (2018) Downloads
Working Paper: Trade and Credit Reallocation: How Banks Help Shape Comparative Advantage (2018) Downloads
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