Credit Constraints and the Extensive Margins of Exports: First Evidence for German Manufacturing

Joachim Wagner

doi:10.5018/economics-ejournal.ja.2015-18

Abstract

Abstract This paper uses a unique newly constructed data set to investigate for the first time the link between credit constraints and the extensive margins of exports in Germany, one of the leading actors on the international market for goods. In line with theoretical considerations and comparable results reported for a small number of other countries the author reports a negative impact of credit constraints on both the number of goods exported and the number of export destination countries that is both statistically highly significant and large from an economic point of view.

Highlights

MotivationInsufficient access to credit at reasonable costs can hamper or even prevent exporting
In line with theoretical considerations and comparable results reported for a small number of other countries the author reports a negative impact of credit constraints on both the number of goods exported and the number of export destination countries that is both statistically highly significant and large from an economic point of view. (Published in Special Issue Micro-econometric Analyses of International Firm Activities) JEL F14 Keywords Credit constraints; exports; extensive margins Authors Joachim Wagner, Leuphana University Lueneburg and CESIS, Stockholm, wagner@leuphana.de
To anticipate the most important results, we find that a less favorable credit rating score is negatively related to both extensive margins of exports

Summary

Motivation

Insufficient access to credit at reasonable costs can hamper or even prevent exporting. Studies that look at the direction of this link usually report that less constraint firms self-select into exporting, but that exporting does not improve financial health of firms. Most of these empirical studies focus on the link between credit constraints and export participation or the share of exports in total sales. Given that the extra costs of exporting often have to be paid for each good that is exported and for each destination country we expect that credit constraints will be negatively related to these extensive margins.

Data and Measurement Issues

Credit Rating Score and Extensive Margins of Export

Results for Alternative Estimation Methods

Concluding Remarks