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

47 Pages Posted: 26 Aug 2009

See all articles by Zhiyuan Li

Zhiyuan Li

Shanghai University of Finance and Economics; University of California, Davis

Miaojie Yu

Peking University - China Center for Economic Research (CCER)

Date Written: August 25, 2009

Abstract

Recent Melitz-type (2003) intra-industry heterogonous trade models argue that a firm's productivity has significant effects on the firm's exports. This paper examines how a firm's credit constraints as well as its productivity affect its export decisions. We imbed the firm's 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

JEL Classification: F1, F3, D9, G2

Suggested Citation

Li, Zhiyuan and Yu, Miaojie, Exports, Productivity, and Credit Constraints: A Firm-Level Empirical Investigation of China (August 25, 2009). Available at SSRN: https://ssrn.com/abstract=1461399 or http://dx.doi.org/10.2139/ssrn.1461399

Zhiyuan Li

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

University of California, Davis ( email )

One Shields Avenue
Davis, CA 95616
United States

HOME PAGE: http://www.econ.ucdavis.edu/graduate/zhyli/

Miaojie Yu (Contact Author)

Peking University - China Center for Economic Research (CCER) ( email )

Beijing, Beijing 100871
China
+86-10-6275-3109 (Phone)

HOME PAGE: http://mjyu.ccer.edu.cn

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