Harmful Pro-Competitive Effects of Trade in Presence of Credit Market Frictions∗
نویسندگان
چکیده
We explore the consequences of international trade in an economy that encompasses technology choice and an endogenous distribution of mark-ups due to credit market frictions. We show that in such an environment a gradual opening of trade may —but not necessarily must —have a negative impact on productivity and overall output. The reason is that the pro-competitive effects of trade reduce mark-ups and hence make access to credit more diffi cult for smaller firms (an implication we substantiate using firm-level data from Latin America). As a result, smaller firms —while not driven out of the market —may be forced to switch to less productive technologies. JEL classification: O11, F13, O16
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