Finance, comparative advantage, and resource allocation

Jaud, M., Kukenova, M. and Strieborny, M. (2018) Finance, comparative advantage, and resource allocation. Review of Finance, 22(3), pp. 1011-1061. (doi: 10.1093/rof/rfx047)

Abstract

Can financial institutions and markets enhance the discipline imposed by competitive product markets and thus improve resource allocation in the real economy? We address this question in the context of international trade, using disaggregated product-level data from seventy-one countries exporting to the USA. We show that exported products exit the US market sooner if they stand far away from the exporting country’s comparative advantage. This pattern is stronger when the exporting country has a well-developed banking system, but it is unaffected by the depth of stock markets. These results are in accordance with theories stressing the disciplining role of debt and monitoring abilities of banks.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Strieborny, Dr Martin
• Authors: Jaud, M., Kukenova, M., and Strieborny, M.
• College/School: College of Social Sciences > Adam Smith Business School > Accounting and Finance
• Journal Name: Review of Finance
• Publisher: Oxford University Press
• ISSN: 1572-3097
• ISSN (Online): 1573-692X
• Published Online: 12 October 2017
• Copyright Holders: Copyright © 2017 The Authors
• First Published: First published in Review of Finance 22(3): 1011-1061
• Publisher Policy: Reproduced in accordance with the publisher copyright policy