Asymmetric Effects of Financial Development on Export Price and Quality Across Countries

49 Pages Posted: 15 Apr 2019

See all articles by ByeongHwa Choi

ByeongHwa Choi

Indiana University

Volodymyr Lugovskyy

Indiana University Bloomington - Department of Economics

Date Written: May 2019

Abstract

We derive two novel predictions: financial development has a more pronounced effect on quality in countries with greater labor productivity, and its effect on export prices is U‐shaped in labor productivity. We confirm our predictions empirically and show that the negative effect of financial development on export prices is greatest in middle‐productivity countries, while its positive effect on quality is strongest in the most productive countries. Our findings contribute to the literature on the poverty trap: we argue that improving the quality of financial institutions alone is unlikely to boost quality or lower prices of the poorest countries.

Suggested Citation

Choi, ByeongHwa and Lugovskyy, Volodymyr, Asymmetric Effects of Financial Development on Export Price and Quality Across Countries (May 2019). Review of International Economics, Vol. 27, Issue 2, pp. 594-642, 2019, Available at SSRN: https://ssrn.com/abstract=3371553 or http://dx.doi.org/10.1111/roie.12390

ByeongHwa Choi (Contact Author)

Indiana University ( email )

Wylie Hall 105
100 South Woodlawn
Bloomington, IN 47405
United States

Volodymyr Lugovskyy

Indiana University Bloomington - Department of Economics ( email )

Wylie Hall
Bloomington, IN 47405-6620
United States

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