Competition, asset build up and export incentives: The role of imperfect credit market

Sugata Marjit and Moushakhi Ray

Journal of Asian Economics, 2021, vol. 77, issue C

Abstract: This paper studies the export incentive of credit rationed, competitive and homogenous firms through asset build up highlighting the generic trade-off between competition and asset value in an imperfect credit market where poor and rich firms have different levels of assets. It is a contribution to the issues related to finance and trade in developing countries as raised first in Jones and Marjit (2001, AER). Our theoretical and empirical results indicate that although firms in more competitive industries are likely to be exporters, history of greater local competition before the entry of firms into export market i.e. under autarky, hurts export incentive by limiting cash flows and asset build up. In our set up more intense local competition hence lower price is an advantage to access global markets, but associated low profits and hence lower assets acts a detriment.

Keywords: Asset-heterogeneity; Capital accumulation; Competition; Credit-market-Imperfection; Entry cost; Export-incentive (search for similar items in EconPapers)
JEL-codes: F1 F14 G10 G20 L1 L2 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1049007821001299
Full text for ScienceDirect subscribers only

Related works:
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:eee:asieco:v:77:y:2021:i:c:s1049007821001299

DOI: 10.1016/j.asieco.2021.101400

Access Statistics for this article

Journal of Asian Economics is currently edited by C. Wiemer

More articles in Journal of Asian Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().