Variable export price elasticity, product quality, and credit constraints: Theory and evidence from Greek firms

Abstract

We propose a simple model with endogenous quality, additive non-homothetic preferences and credit constraints. A unique data set of Greek manufacturing firms with firm-level exports, credit scores and other financial variables supports the model’s main predictions. Specifically, we establish that less credit-constrained Greek exporters with higher credit scores face export demand curves with lower price elasticity, charge higher export prices, and export higher-quality products.