Abstract
This paper investigates the effects of financial frictions on the growth of firms and their decision to enter export markets. We propose a general equilibrium model economy in which monopolistically competitive firms face endogenous financing constraints. Financial constraints arise because of long-term lending contracts, which are optimal given an informational asymmetry between firms and investors about the firms performance over time. While there are no ex-ante productivity differences across firms, the history of revenue realizations and the optimal contract determine firms' access to credit, and thus their export decisions. Consistent with recent empirical regularities on exporters, the model predicts that (i) young exporters tend to be smaller and grow faster than established ones, (ii) the exit rate of new exporters is disproportionally higher than that of more established exporters (iii) investment by older exporters is more stable, and (iv) the share of export increases with firm age and size.
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