Good Connections: Bank Specialization and the Tariff Elasticity of Exports

41 Pages Posted: 1 Jun 2021

Multiple version iconThere are 2 versions of this paper

Date Written: May 2021

Abstract

In this paper, we show that exporters react more strongly to a cut in tariffs by a distant country
when their banks have already been specializing in funding exports to this country. To make our
case, we build upon a theoretical model where an informational advantage provided by the
exporter's bank results in a lower distribution cost in the destination country. We test the
implications of this model for French exporters using the 2011 free trade agreement between the
European Union and South-Korea as a quasi-natural experiment. We measure a bank's
specialization in Korea using granular information on bank-firm credit lines and firm-level exports
in the years preceding the agreement. We assess how customers of different banks react to this trade
liberalization episode using detailed information on the bilateral tariff cuts and disaggregated data
on French export flows at the firm-product level. We find robust evidence that the specialized
lenders help exporters to respond more strongly to changes in tariffs. The effect is strong for all
firms along the extensive margin, but only for less productive exporters along the intensive margin.

Keywords: Trade Elasticities, Bank Specialization, Trade Liberalization

JEL Classification: F14, G21

Suggested Citation

RPS Submitter, Banque de France and Berthou, Antoine and Mésonnier, Jean-Stéphane and Mayer, Thierry, Good Connections: Bank Specialization and the Tariff Elasticity of Exports (May 2021). Banque de France Working Paper No. 814, Available at SSRN: https://ssrn.com/abstract=3854831 or http://dx.doi.org/10.2139/ssrn.3854831

Banque de France RPS Submitter (Contact Author)

affiliation not provided to SSRN

Antoine Berthou

Banque de France ( email )

Paris
France

Jean-Stéphane Mésonnier

Banque de France ( email )

Paris
France

Thierry Mayer

Sciences Po ( email )

28 Rue des Saint-Peres
Paris, Paris 75006
France

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