How productivity and credit constraints affect exports differently? Firm-level evidence from China

Abstract

This paper aims to differentiate between the impacts of a firm’s productivity and credit constraints on its export behavior. Based on the different channels through which these two factors influence firm exports, we propose three main hypotheses. First, credit constraints exert a larger impact on export extensive margin than on export intensive margin. Specifically, credit constraints influence the number of export destinations more than the average export value for each destination. Second, productivity has a stronger effect on intensive margin, relative to its effect on extensive margin. That is, productivity exerts greater influence on the average export value than on the number of export destination countries. Third, in aggregate, productivity plays a more important role in a firm’s total export value, compared with credit constraints. We verify the above hypotheses using the firm-level export data in China from 2000 to 2007.