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Export price adjustments under financial constraints

Angelo Secchi (), Federico Tamagni () and Chiara Tomasi ()

Canadian Journal of Economics, 2016, vol. 49, issue 3, 1057-1085

Abstract: Exploiting data on the product-destination-level transactions of a large panel of Italian firms, we provide evidence that financial constraints affect price variation across exporters. Constrained exporters charge higher prices than do unconstrained firms that export to the same product-destination market. This pattern is the result of a two-fold effect. Distressed firms pass on their higher production costs through prices. However, they also charge higher mark-ups. We explain this evidence referring to models in which rival firms produce different brands of the same product for customers with significant switching costs and producers face capital market imperfections when they need external financing. Our empirical investigations corroborate this explanation: price gaps are higher when switching costs or other forms of demand rigidity are expected to be more relevant.

JEL-codes: F10 (search for similar items in EconPapers)
Date: 2016
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Related works:
Working Paper: Export price adjustments under financial constraints (2016)
Working Paper: Export price adjustments under financial constraints (2014) Downloads
Working Paper: Export price adjustments under financial constraints (2013) Downloads
Working Paper: Export price adjustments under financial constraints (2013)
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