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Access to Credit and Comparative Advantage

Journal
The Canadian journal of economics
ISSN
0008-4085
ISSN-Digital
1540-5982
Type
journal article
Date Issued
2017-05
Author(s)
Egger, Peter
Keuschnigg, Christian  
DOI
10.1111/caje.12266
Abstract
Access to external funds is crucial for the entry and expansion of entrepreneurial firms and the sectors they predominantly arise in. This paper reports three important results. First, comparative advantage is shaped by factor endowments as well as fundamental determinants of corporate finance. In particular, a larger equity ratio of firms and tough governance standards relax financing
constraints, lead to entry of firms at the lower bound of the productivity distribution, and create an endogenous comparative advantage in sectors where entrepreneurial firms are clustered. Second, a small degree of protection in the constrained sector can raise a country’s welfare by relaxing financing constraints if terms-of-trade effects are small. Third, a small degree of protection of the financially dependent industry in a financially underdeveloped country might even raise world welfare.
Language
English
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Economic Policy
Publisher
Wiley-Blackwell
Publisher place
Oxford [u.a.]
Volume
50
Number
2
Start page
481
End page
505
URL
https://www.alexandria.unisg.ch/handle/20.500.14171/102414
Subject(s)

economics

Division(s)

SEPS - School of Econ...

University of St.Gall...

FGN - Institute of Ec...

Eprints ID
250516
File(s)
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Thumbnail Image

open.access

Name

CompAdvFinance2016Feb9.pdf

Size

323.18 KB

Format

Adobe PDF

Checksum (MD5)

481dcb4ced7f8c3f572d1857b17144b0

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