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Finance, Comparative Advantage, and Resource Allocation

Melise Jaud (), Madina Kukenova and Martin Strieborny

No 2013/11, Knut Wicksell Working Paper Series from Lund University, Knut Wicksell Centre for Financial Studies

Abstract: We show that exported products exit the US market sooner if they violate the Heckscher-Ohlin notion of comparative advantage. Crucially, this pattern is stronger when exporting country has a well-developed banking system, measured by a high ratio of bank credit over the GDP. Banks thus push firms away from exports that are facing an uphill battle on a competitive foreign market due to a suboptimal use of the domestic factor endowment. Our results imply a disciplining role for bank credit in terminating inefficient trade flows. This constitutes a new channel through which finance improves resource allocation in the real economy. Keywords: resource misallocation, finance, comparative advantage, ex- port survival

Keywords: Resource misallocation; finance; comparative advantage; ex-port survival (search for similar items in EconPapers)
JEL-codes: F11 G21 G30 O16 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2013-06-19
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Journal Article: Finance, Comparative Advantage, and Resource Allocation (2018) Downloads
Working Paper: Finance, Comparative Advantage, and Resource Allocation (2014) Downloads
Working Paper: Finance, Comparative Advantage, and Resource Allocation (2013) Downloads
Working Paper: Finance, comparative advantage, and resource allocation (2012) Downloads
Working Paper: Finance, Comparative Advantage, and Resource Allocation (2010) Downloads
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