Capital market imperfections and trade liberalization in general equilibrium
Research output: Journal contributions › Journal articles › Research › peer-review
Standard
Capital market imperfections and trade liberalization in general equilibrium. / Irlacher, Michael; Unger, Florian.
In: Journal of Economic Behavior and Organization, Vol. 145, 01.2018, p. 402-423.Research output: Journal contributions › Journal articles › Research › peer-review
Harvard
APA
Vancouver
Bibtex
}
RIS
TY - JOUR
T1 - Capital market imperfections and trade liberalization in general equilibrium
AU - Irlacher, Michael
AU - Unger, Florian
N1 - Publisher Copyright: © 2017 Elsevier B.V.
PY - 2018/1
Y1 - 2018/1
N2 - This paper develops a new international trade model with firm-specific credit frictions and endogenous borrowing costs in general equilibrium. We highlight new implications of globalization when general equilibrium effects on capital markets are present. In particular, we show that globalization increases the share of financially constrained firms and affects producers very differently depending on their exposure to credit frictions. While the positive effect of globalization dominates for unconstrained firms, higher borrowing costs and tougher competition especially hurt credit-rationed producers. We show that these new adjustments increase the heterogeneity among firms and reduce welfare gains from trade. Our theory is consistent with new empirical patterns from World Bank firm-level data. We show that credit frictions are positively related to the degree of product competition and to the variance of sales across firms.
AB - This paper develops a new international trade model with firm-specific credit frictions and endogenous borrowing costs in general equilibrium. We highlight new implications of globalization when general equilibrium effects on capital markets are present. In particular, we show that globalization increases the share of financially constrained firms and affects producers very differently depending on their exposure to credit frictions. While the positive effect of globalization dominates for unconstrained firms, higher borrowing costs and tougher competition especially hurt credit-rationed producers. We show that these new adjustments increase the heterogeneity among firms and reduce welfare gains from trade. Our theory is consistent with new empirical patterns from World Bank firm-level data. We show that credit frictions are positively related to the degree of product competition and to the variance of sales across firms.
KW - Credit constraints
KW - General equilibrium
KW - Globalization
KW - Imperfect capital markets
KW - Welfare
KW - Economics
UR - http://www.scopus.com/inward/record.url?scp=85037038624&partnerID=8YFLogxK
U2 - 10.1016/j.jebo.2017.11.029
DO - 10.1016/j.jebo.2017.11.029
M3 - Journal articles
AN - SCOPUS:85037038624
VL - 145
SP - 402
EP - 423
JO - Journal of Economic Behavior and Organization
JF - Journal of Economic Behavior and Organization
SN - 0167-2681
ER -