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Mitigating information frictions in trade: Evidence from export credit guarantees
64-C, Mittal Towers, Nariman Point, Mumbai, India.
Department of Economics and Business Economics, Aarhus University, Aarhus, Denmark.
Örebro University, Örebro University School of Business. Global Labor Organization, Essen, Germany; Ratio, Stockholm, Sweden.ORCID iD: 0000-0003-0149-9598
Örebro University, Örebro University School of Business. Department of Economics.ORCID iD: 0000-0003-3724-2399
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2023 (English)In: Journal of International Economics, ISSN 0022-1996, E-ISSN 1873-0353, Vol. 145, article id 103831Article in journal (Refereed) Published
Abstract [en]

Information frictions make foreign trade risky. In particular, the risk of buyer default deters firms from selling abroad. To address this issue, many countries offer export credit guarantees to provide insurance to exporters. In this paper, we investigate the causal effects of guarantees by exploiting a quasi-natural experiment in Sweden and rich register data on guarantees, firms and trade. Estimates from a fuzzy regression discontinuity design show large positive effects on the probability of exporting and the value of exports to the destination for which the guarantees are issued. These results are robust to an alternative approach using a difference-in-differences matching estimator. Further findings suggest that guarantees impact firms heterogeneously and play an important role in resolving buyer default risk and easing liquidity constraints. Larger impacts are observed in non-OECD countries, on smaller, liquidity constrained exporters and for firms selling products that face a relatively high cost of buyer default.

Place, publisher, year, edition, pages
Elsevier, 2023. Vol. 145, article id 103831
Keywords [en]
Buyer default, Export credit guarantees, Firm performance, Information frictions, Liquidity constraints, Trade
National Category
Economics
Identifiers
URN: urn:nbn:se:oru:diva-110190DOI: 10.1016/j.jinteco.2023.103831ISI: 001110247800001Scopus ID: 2-s2.0-85178237104OAI: oai:DiVA.org:oru-110190DiVA, id: diva2:1819107
Funder
Swedish Agency for Economic and Regional Growth, 2016-149Torsten Söderbergs stiftelse, E38-16Available from: 2023-12-13 Created: 2023-12-13 Last updated: 2024-01-10Bibliographically approved

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Lodefalk, MagnusTang, Aili

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