Exports, Productivity, and Credit Constraints: A Firm-Level Empirical Investigation of China

Zhiyuan Li () and Miaojie Yu

Global COE Hi-Stat Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: Recent Melitz-type (2003) intra-industry heterogonous trade models argue that a firm fs productivity has significant effects on the firm fs exports. This paper examines how a firm fs credit constraints as well as its productivity affect its export decisions. We imbed the firm fs credit constraints into a Melitz-type general-equilibrium model by endogenizing the probability of the success of firm-specific projects. We show that, all else equal, it is easier for firms to enter the export market if (1) the probability of the success of their project is higher and consequently they have easier access to external finance from financial intermediaries; or (2) they have alternative sources, other than from financial intermediaries, to obtain funds. We test these theoretical hypotheses using firm-level data from Chinese manufacturing industries and find strong evidence supporting the predictions of the model.

Keywords: Credit Constraints; Heterogeneous Firms; Productivity; Trade (search for similar items in EconPapers)
JEL-codes: D9 F1 F3 G2 (search for similar items in EconPapers)
Date: 2009-12
New Economics Papers: this item is included in nep-eff, nep-int, nep-ppm and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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