Working Paper: CEPR ID: DP15890
Authors: Antoine Berthou; Thierry Mayer; Jean-Stéphane Mesonnier
Abstract: In this paper, we show that exporters react more strongly to a tariff cut when their banks have been specializing in funding exports to this country. To make our case, we build upon a theoretical model where an informational advantage provided by the exporter's bank results in a lower distribution cost in the destination country. We test the implications of this model for French exporters using the 2011 free trade agreement between the European Union and the Republic of South-Korea as a quasi-natural experiment. We measure a bank's specialization in Korea using granular information on bank-firm credit lines and firm-level exports in the years preceding the agreement. We compare how customers of different banks react to the trade liberalization episode using detailed information on the bilateral tariff cuts and disaggregated data on French export flows at the firm-product level. We find robust evidence that the specialized lenders help exporters to respond more strongly to changes in tariffs. The effect is strong for all firms along the extensive margin, but only for smaller, less productive exporters along the intensive margin.
Keywords: trade elasticities; bank specialization; trade liberalization
JEL Codes: F14; G21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| bank specialization (G21) | export response (F10) |
| tariff cuts (F13) | export response (F10) |
| bank specialization + tariff cuts (F65) | export response (F10) |
| firm productivity + bank specialization (G21) | export response (F10) |