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Credit Constraints, Technology Choice and Exports: A Firm‐level Study for Latin American Countries
Author(s) -
Hasan Syed,
Sheldon Ian
Publication year - 2016
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/rode.12248
Subject(s) - economics , productivity , order (exchange) , latin americans , investment (military) , panel data , international economics , monetary economics , macroeconomics , finance , econometrics , linguistics , philosophy , politics , political science , law
In this paper, constraints on technology choice and credit access are introduced into a firm‐level trade model in a dynamic setting in order to explain factors that limit benefits to a firm from trade liberalization. Theoretical analysis shows that firms face credit constraints depending on their initial productivity and the cost of credit. As a result, credit‐constrained firms may not be able to cross the minimum productivity threshold needed to enter and compete in a foreign market. Empirical analysis using firm‐level panel data for six Latin American countries confirms that financial constraints negatively influence firms' export and investment decisions.