Credit constraints, endogenous innovations, and price setting in international trade
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Credit constraints, endogenous innovations, and price setting in international trade. / Eckel, Carsten; Unger, Florian.
in: International Economic Review, Jahrgang 64, Nr. 4, 11.2023, S. 1715-1747.Publikation: Beiträge in Zeitschriften › Zeitschriftenaufsätze › Forschung › begutachtet
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TY - JOUR
T1 - Credit constraints, endogenous innovations, and price setting in international trade
AU - Eckel, Carsten
AU - Unger, Florian
N1 - Publisher Copyright: © 2023 The Authors. International Economic Review published by Wiley Periodicals LLC on behalf of the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
PY - 2023/11
Y1 - 2023/11
N2 - This article analyzes the role of credit frictions in a trade model where producers differ in their capabilities to conduct process and quality innovations and require external finance for investments. Accounting for cost-based and quality-based sorting of firms in a unified framework allows us to demonstrate that the reactions of prices and commonly used productivity measures do not necessarily reflect welfare implications. Credit frictions lead to distortions through aggravated access to finance and endogenous price adjustments so that the responses of quantity-based and revenue-based productivity differ substantially. In counterfactual scenarios, we show that these differential effects are quantitatively important.
AB - This article analyzes the role of credit frictions in a trade model where producers differ in their capabilities to conduct process and quality innovations and require external finance for investments. Accounting for cost-based and quality-based sorting of firms in a unified framework allows us to demonstrate that the reactions of prices and commonly used productivity measures do not necessarily reflect welfare implications. Credit frictions lead to distortions through aggravated access to finance and endogenous price adjustments so that the responses of quantity-based and revenue-based productivity differ substantially. In counterfactual scenarios, we show that these differential effects are quantitatively important.
KW - Economics
UR - http://www.scopus.com/inward/record.url?scp=85167365686&partnerID=8YFLogxK
U2 - 10.1111/iere.12651
DO - 10.1111/iere.12651
M3 - Journal articles
AN - SCOPUS:85167365686
VL - 64
SP - 1715
EP - 1747
JO - International Economic Review
JF - International Economic Review
SN - 0020-6598
IS - 4
ER -