Finance, Comparative Advantage, and Resource Allocation*

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. 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. Terms of use: Documents in JEL AbstractWe 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 …rms 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 ine¢ cient trade ‡ows. This constitutes a new channel through which …nance improves resource allocation in the real economy.

Trading of Indonesian Crude Palm Oil Supply Chain and Its Impact on Economic Growth: Implementation of Theory of Comparative Advantage and the Competitive Advantage of Nation

“…This theory was put forward by David Ricardo. In this theory, he states that international trade or exports can occur if there are differences in comparative advantages of each country (Abiad and Teipelke, 2017;Alami, 2017, Bansal et al, 2017, Jaud et al, 2018, Murdock, 2019and Davis and Dingel, 2020. Comparative advantage can be achieved if a country is able to produce a number of goods with a large volume but at a lower cost compared to other countries.…”

Does financial integration drive export diversification? Evidence from a cross-country analysis

“…Countries tend to concentrate their exports because of imperfect and incomplete access to finance (DeRosa, 1992;Acemoglu and Zilibotti, 1997). While other studies find that comparative advantage is another reason for export concentration (Saint-Paul, 1992;Jaud et al, 2012). According to Ruffin (1974), a country diversifies its exports to evade the uncertainty in the general price of goods and trade.…”

Financial vulnerability and export dynamics

“…This literature has shown that a well-developed and functioning financial environment is key for countries' and firms' export success. In particular, domestic financial development improves export performance, especially for industries dependent on external finance and firms facing credit constraints (e.g., Beck, 2002Beck, , 2003Becker, Jinhzu, & Greenberg, 2013;Berman & Hericourt, 2010;Besedes, Byung-Cheol, & Lugovskyy, 2014;Greenaway, Guariglia, & Kneller, 2007;Jaud, Kukenova, & Strieborny, 2009, 2017Ju & Wei, 2005;Manova, 2007Manova, , 2013. A related strand of papers has explored the negative impact of shocks to the financial system on trade performance, especially during the recent global financial crisis (e.g., Abiad, Mishra, & Topalova, 2014;Amiti & Weinstein, 2011;Baldwin, 2009;Bems, Johnson, & Yi, 2013;Berman and Martin, 2012;Bricongne, Fontagn e, Gaulier, Taglioni, & Vicard, 2012;Chor & Manova, 2012;Kiendrebeogo, 2013;Levchenko, Lewis, & Tesar, 2010;Paravisini, Rappoport, Schnabl, & Wolfenzon, 2015).…”