Q2. What are the main reasons for the correlations?
Significant correlations are usually attributed to capital market imperfections and therefore suggest the presence of financing constraints.
Q3. How do the authors test for a possible endogeneity bias?
the control for a possible endogeneity bias requires to perform a two-stage least squares (2SLS)14 estimation, using two lags of current period regressors as instruments.
Q4. What is the effect of financial factors on the intensive margin of trade?
Their contention is that the impact of financial may be, because of the existence of fixed costs of exports, more important on the extensive margin than on the intensive one.
Q5. What are the effects of financial constraints on exporting probability?
Once the firms became exporters, the potential maintenance cost that they have to pay at each subsequent period are dramatically lower, thus dampening the impact of financial constraints on exporting probability.
Q6. Why do the authors need to estimate the exporting probability?
Still due to the limited degrees of freedom, the authors cannot perform any non-linear instrumental variables estimation for the exporting probability.
Q7. What is the effect of financial constraints on exporting?
When firms have a restricted access to external finance, variations in productivity will not have any effect on their exporting decision.
Q8. What is the significance of the results of Melitz (2003)?
This result has important implications: in Melitz (2003), a trade liberalization leads to intrasectoral firms reallocations in favor of the most productive ones, and in turn generate aggregate productivity gains.
Q9. What are the main variables that are not correlated with the country’s financial development?
To ensure that their results are not biased due to omitted variables correlated with country’s financial development, the authors include as controls several other country’s characteristics, including GDP growth, inflation, and institutions.
Q10. How do the authors study the impact of financial factors on the intensive and extensive margins of trade?
Using a large cross-country firm-level database on nine developing and emerging economies, the authors have studied the impact of financial factors on both the intensive and extensive margins of trade.
Q11. What are the main factors that have been used to determine the extent of financial contractibility?
several works have shown that when financial contractibility is poor (which is more likely to be the case in developing countries), external finance requires higher proportions of assets that more easily remain with investors if the relationship deteriorates (Braun, 2003).
Q12. What is the effect of financial development on exporting?
financial development thus reduces the disconnection between productivity and exporting decisions generated by credit constraints.
Q13. What is the expected sign of the proxy for access to finance?
The authors expect the signs of estimated coefficients on their proxy for access to finance (either the ratio of total assets over total debt, cash flow over total assets, or tangible assets over total assets) to be positive, i.e. γ > 0.
Q14. How is the impact of financial factors on the intensive margin of trade estimated?
Proposition 3: Intensive marginThe impact of financial factors on the intensive margin of trade is estimated by replacing the dependent variable by the value of export.