Financial Dependence and International Trade
Does financial development translate into a comparative advantage in industries that use more external finance? The author uses industry-level data on firms' dependence on external finance for 36 industries and 56 countries to examine this question. The author shows that countries with better-developed financial systems have higher export shares and trade balances in industries that use more external finance. These results are robust to the use of alternative measures of external dependence and financial development and are not due to reverse causality or simultaneity bias.
Summary: | Does financial development translate
into a comparative advantage in industries that use more
external finance? The author uses industry-level data on
firms' dependence on external finance for 36 industries
and 56 countries to examine this question. The author shows
that countries with better-developed financial systems have
higher export shares and trade balances in industries that
use more external finance. These results are robust to the
use of alternative measures of external dependence and
financial development and are not due to reverse causality
or simultaneity bias. |
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