Publication: Finance, Comparative Advantage, and Resource Allocation
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2012-06
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2014-09-02
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The authors 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. The 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.
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“Kukenova, Madina; Jaud, Melise; Strieborny, Martin. 2012. Finance, Comparative Advantage, and Resource Allocation. Policy Research Working Paper;No. 6111. © http://hdl.handle.net/10986/19930 License: CC BY 3.0 IGO.”
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