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Finance, Comparative Advantage, and Resource Allocation

Melise Jaud, Madina Kukenova and Martin Strieborny

Cahiers de Recherches Economiques du Département d'économie from Université de Lausanne, Faculté des HEC, Département d’économie

Abstract: The paper examines the interplay between financial development and comparative advantage in shaping the survival of exporting firms on foreign markets. Exports suffering from comparative disadvantage (labour-intensive products from capital-abundant countries) survive shorter on the competitive US market. Crucially, the pattern is stronger if the exporting country has a well-developed banking system. This suggests a positive role for finance in pushing the manufacturing sector towards export composition congruent with the comparative advantage of a given country. A strong financial sector can thus mitigate misallocation of resources arising from inefficient exporting patterns.

Keywords: financial development; resource misallocation; comparative advantage (search for similar items in EconPapers)
JEL-codes: G21 O16 F11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cis and nep-int
Date: 2010-11
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Related works:
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 (2013) Downloads
Working Paper: Finance, comparative advantage, and resource allocation (2012) Downloads
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