Harmful Pro-Competitive Effects of Trade in Presence of Credit Market Frictions

Item Type Journal paper
Abstract We explore the consequences of international trade in an economy that encompasses technology choice and an endogenous distribution of mark-ups due to credit market frictions. We show that in such an environment a gradual opening of trade may -- but not necessarily must -- have a negative impact on productivity and overall output. The reason is that the pro-competitive effects of trade reduce mark-ups and hence make access to credit more difficult for smaller firms. As a result, smaller firms -- while not driven out of the market -- may be forced to switch to less productive technologies.
Authors Föllmi, Reto & Oechslin, Manuel
Journal or Publication Title Journal of Money, Credit and Banking
Language English
Keywords International trade, credit market frictions, productivity, polarization
Subjects economics
finance
HSG Classification contribution to scientific community
HSG Profile Area SEPS - Economic Policy
Refereed Yes
Date 2020
Publisher Wiley-Blackwell
Number 52
Page Range 1493-1525
ISSN 0022-2879
Depositing User Prof. Dr. Reto Föllmi
Date Deposited 16 Apr 2019 12:37
Last Modified 04 Oct 2022 00:30
URI: https://www.alexandria.unisg.ch/publications/256974

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Citation

Föllmi, Reto & Oechslin, Manuel (2020) Harmful Pro-Competitive Effects of Trade in Presence of Credit Market Frictions. Journal of Money, Credit and Banking, (52). 1493-1525. ISSN 0022-2879

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https://www.alexandria.unisg.ch/id/eprint/256974
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