Abstract:
Exporters are typically large and productive firms, and many policies implicitly or explicitly encourage them to expand. In this paper I combine a natural experiment and a dynamic model to show that credit constraints are particularly binding for exporting firms, and to quantify the effects of policies that target them. I exploit a directed credit policy in India as a source of exogenous variation in credit supply and find that exporters respond strongly while similarly sized non-exporters do not. I build a model in which heterogeneous entrepreneurs produce subject to credit constraints and choose to export. The model highlights that the decision to export is driven both by an entrepreneur's productivity and by their access to credit. Which force dominates determines whether exporters are typically more or less constrained than non-exporters. I estimate the model by targeting the results of the natural experiment and find that productivity is the key driver of the decision to export. Overall, 37% of exporters in the model are constrained, compared to 8% of non-exporters, and reallocating inputs towards them would raise aggregate productivity. In counterfactual experiments, I show that directly relaxing the credit constraint of exporting firms increases aggregate productivity by 3.33%. However, subsidizing exporter employment worsens misallocation because the primary beneficiaries are relatively unproductive, unconstrained exporters.
The seminar will be held in room 1249 (12th floor) at Eilert Sundts Hus. The address is Moltke Moes vei 31.