Intermediated Trade and Credit Constraints: The Case of Firm's Imports

38 Pages Posted: 30 Mar 2021

See all articles by Francesco Nucci

Francesco Nucci

University of Rome I

Filomena Pietrovito

University of Molise

Alberto F. Pozzolo

Università degli Studi di Roma Tre

Date Written: March 2021

Abstract

Growing evidence suggests that a large share of international trade transactions are made through intermediaries and that whether firms use them or not depends on different factors. In this paper, we investigate whether credit constraints introduce a degree of difference among firms in their mode of importing. To begin, we develop a simple analytical framework highlighting the possible links between credit constraints and reliance on import intermediaries, and then use firm-level data from 66 developing and developed countries to test the model's predictions. The results show that credit-constrained firms exhibit a higher probability of importing their inputs using an intermediary, while unconstrained firms are more likely to import directly. Our results also establish that the impact of credit constraints on the probability of indirect importing is amplified for firms with a higher distance from their international sourcing network. Moreover, if firms face other types of frictions to imports, then the probability that credit-constrained firms rely on intermediaries is estimated to be higher. The frictions we consider relate to the degree of regulatory burden and the extent of documentary compliance, time to import and other costs involved in import activities.

Keywords: Firms' Import Mode; Trade Intermediaries; Financial Constraints

JEL Classification: F10, F14, F36, G20

Suggested Citation

Nucci, Francesco and Pietrovito, Filomena and Pozzolo, Alberto F., Intermediated Trade and Credit Constraints: The Case of Firm's Imports (March 2021). Available at SSRN: https://ssrn.com/abstract=3815116 or http://dx.doi.org/10.2139/ssrn.3815116

Francesco Nucci

University of Rome I ( email )

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

Filomena Pietrovito

University of Molise ( email )

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

Alberto F. Pozzolo (Contact Author)

Università degli Studi di Roma Tre ( email )

Via Ostiense 163
Roma, RM 00154
Italy

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

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