Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/121137 
Year of Publication: 
2014
Series/Report no.: 
FIW Working Paper No. 130
Publisher: 
FIW - Research Centre International Economics, Vienna
Abstract: 
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.
Subjects: 
resource misallocation
finance
comparative advantage
export survival
JEL: 
F11
G21
G30
O16
Document Type: 
Working Paper

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