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Post-Crisis Growth and Integration in Europe

Post-Crisis Growth and Integration in Europe

Catching-up Strategies in CESEE Economies

Edited by Ewald Nowotny, Peter Mooslechner and Doris Ritzberger-Grünwald

Against the backdrop of the financial crisis that unfolded in 2008, this book deals with policy challenges going forward, focusing in particular on the ongoing catching-up process in Central, Eastern and South-Eastern European countries.

Chapter 19: Firms’ Patterns of Trade and Access to Finance

Joze P. Damijan and Crt Kostevc

Subjects: economics and finance, financial economics and regulation


Jože P. Damijan and Črt Kostevc 1. INTRODUCTION Vast empirical research conducted since the mid-1990s on the issue of international trade has documented significant differences between exporters and firms serving domestic markets only. At the same time, both empirical and theoretical work on trade has been quite ineffective in establishing a convincing mechanism for learning-by-trading. In other words, evidence is still limited on how firms’ foreign trade participation feeds back into their performance. One of the primary reasons is that much of the literature has focused solely on exports. Here, the existing theoretical models with heterogeneous firms and randomly assigned productivities in the tradition of Melitz (2003) fall short of explaining why some firms are initially ‘better’, enabling them to start exporting. Studies dealing with the impact of imports on firm performance are rather scarce, but importers have been shown to have a larger productivity premium than exporters (Altomonte et al., 2008). The notion of imports has traditionally been a source of increased competition in the local markets, impacting firms’ productivity through increased competitive pressures. Only recently have studies started to focus on other aspects of imports as a source of corporate productivity growth, such as lower input prices and larger input varieties. Amiti and Konings (2007) document the effects of import liberalization on the productivity of Indonesian firms, which imply that access to cheaper intermediates might have a much larger impact on firm productivity gains than that of increased import competition. Goldberg et al. (2011) demonstrate the impact...

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