Imports and Credit Rationing: A Firm-Level Investigation

33 Pages Posted: 10 Jul 2020

See all articles by Francesco Nucci

Francesco Nucci

University of Rome I

Alberto F. Pozzolo

Roma Tre University

Filomena Pietrovito

University of Molise

Multiple version iconThere are 2 versions of this paper

Date Written: June 17, 2020

Abstract

Firm performance is known to benefit from participation in import markets. For this reason, understanding whether credit constraints hamper firms’ ability to purchase foreign inputs is a relevant issue. In this paper, we investigate the relationship between financial constraints and imports of intermediate inputs using a large sample of small- and medium-sized enterprises from 66 developing countries. To measure credit constraints we use information from a firm’s in-depth self-assessment of its difficulties in having access to external finance. Furthermore, to tackle the endogeneity problems in the estimation, we rely on an instrumental variable approach that allows us to establish more directly the impact of financial constraints on importing activities. We provide robust evidence of a statistically and economically significant restraining effect of credit constraints on both the probability of importing intermediates (the extensive margin) and the incidence of imported intermediates in total input expenditure (the intensive margin). Moreover, we show that the impact on these margins of import is stronger for firms operating in countries where the financial system is less developed, the quality of institutions poorer and the overall level of economic freedom lower.

Keywords: import market participation, import margins, credit constraints

JEL Classification: D22, F10, F14, F23, M21

Suggested Citation

Nucci, Francesco and Pozzolo, Alberto F. and Pietrovito, Filomena, Imports and Credit Rationing: A Firm-Level Investigation (June 17, 2020). Centro Studi Luca d'Agliano Development Studies Working Paper No. 461, 2020, Available at SSRN: https://ssrn.com/abstract=3629333 or http://dx.doi.org/10.2139/ssrn.3629333

Francesco Nucci (Contact Author)

University of Rome I ( email )

Piazzale Aldo Moro
Rome, 00185
Italy
+39 06 4991 0847 (Phone)
+39 06 445 3246 (Fax)

Alberto F. Pozzolo

Roma Tre University ( email )

Via Ostiense 163
Roma, RM 00154
Italy

HOME PAGE: http://www.uniroma3.it/

Filomena Pietrovito

University of Molise ( email )

Via F. de Sanctis s.n.c.
Campobasso, Campobasso (CB) 86100
Italy

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