Export price adjustments under financial constraints

Secchi, Angelo; Tamagni, Federico; Tomasi, Chiara

Export price adjustments under financial constraints

Angelo Secchi, Federico Tamagni and Chiara Tomasi ()
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Chiara Tomasi: UNITN - Università degli Studi di Trento = University of Trento

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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.

Keywords: international trade; financial constraints (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

Published in Canadian Journal of Economics / Revue Canadienne d'Économique, 2016, 49 (3), pp.1057-1085. ⟨10.1111/caje.12225⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01297116

DOI: 10.1111/caje.12225

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