Finance, Comparative Advantage, and Resource Allocation
The authors 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...
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| Other Authors: | , |
| Format: | eBook |
| Language: | English |
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Washington, D.C
The World Bank
2012
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| Online Access: | |
| Collection: | World Bank E-Library Archive - Collection details see MPG.ReNa |
| Summary: | The authors 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. The 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 |
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| Physical Description: | 37 p |