Finance, Comparative Advantage, and Resource Allocation

Arbeitspapier

We show that exported products exit the US market sooner if they violate the Heckscher-Ohlin notion of comparative advantage. Crucially, this pattern is stronger when exporting country has a well-developed banking system, measured by a high ratio of bank credit over the GDP. Banks thus push firms away from exports that are facing an uphill battle on a competitive foreign market due to a suboptimal use of the domestic factor endowment. Our results imply a disciplining role for bank credit in terminating inefficient trade flows. This constitutes a new channel through which finance improves resource allocation in the real economy.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: FIW Working Paper ; No. 130

Classification and Topics

• Classification: Wirtschaft ; Neoclassical Models of Trade ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Corporate Finance and Governance: General ; Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
• Subject: resource misallocation ; finance ; comparative advantage ; export survival

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Jaud, Melise ; Kukenova, Madina ; Strieborny, Martin
• Event: Veröffentlichung
• (who): FIW - Research Centre International Economics
• (where): Vienna
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/121137
• Last update: 10.03.2025, 11:43 AM CET