Finance, comparative advantage, and resource allocation

Melise Jaud, Madina Kukenova and Martin Strieborny

No 6111, Policy Research Working Paper Series from The World Bank

Abstract: The authors 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. The 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: Markets and Market Access; Economic Theory&Research; Banks&Banking Reform; Debt Markets; Inequality (search for similar items in EconPapers)
Date: 2012-06-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www-wds.worldbank.org/external/default/WDSC ... ered/PDF/WPS6111.pdf (application/pdf)

Related works:
Journal Article: Finance, Comparative Advantage, and Resource Allocation (2018)
Working Paper: Finance, Comparative Advantage, and Resource Allocation (2013)
Working Paper: Finance, Comparative Advantage, and Resource Allocation (2013)
Working Paper: Finance, Comparative Advantage, and Resource Allocation (2010)
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:wbk:wbrwps:6111

Access Statistics for this paper

More papers in Policy Research Working Paper Series from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC.
Bibliographic data for series maintained by Roula I. Yazigi ().