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Exports and Credit Constraints under Incomplete Information: Theory and Evidence from China

Robert C. Feenstra¹; Zhiyuan Li²; Miaojie Yu³

¹ University of California, Davis · ² Shanghai University of Finance and Economics · ³ Peking University

This paper examines why credit constraints for domestic and exporting firms arise in a setting where banks do not observe firms' productivities. To maintain incentive compatibility, banks lend below the amount that firms need for optimal production. The longer time needed for export shipments induces a tighter credit constraint on exporters than on purely domestic firms. In our application to Chinese firms, we find that the credit constraint is more stringent as a firm's export share grows, as the time to ship for exports is lengthened, and as there is greater dispersion of firms' productivities, reflecting more incomplete information.

DOI

10.1162/rest_a_00405

Volume

96 (4)

Pages

729-744

Language

en

Export

BibTeX

Sources

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