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Financial development, exporting and firm heterogeneity in Chile

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Using plant-level data from the manufacturing sector of Chile for the period 1990–2000, this paper examines the effect of financial development on the probability of exporting at the plant level, with a special focus on the heterogeneous responses of plants with different characteristics. The main results are that an improvement in financial development increases the probability of exporting of more productive plants and those with foreign ownership operating in manufacturing sectors that are more dependent on external finance. Our estimates also show that financial development does not appear to improve the probability of exporting for relatively smaller and younger plants. This result suggests that, at least for the case of exporting in Chile, smaller and younger plants are not necessarily more likely to benefit than larger and older plants from improvements in access to credit.

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  1. For a recent survey, see Wagner (2012).

  2. Recent papers using a similar identification strategy with microeconomic data are Jaud and Kukenova (2011) which shows that agri-food products that require more external finance survive longer in foreign markets if the exporting country is more financially developed, and Tsoukas (2011) which presents evidence that stock market development is particularly beneficial to large firms.

  3. Although a plant is not necessarily a firm, in the case of Chilean manufacturing, most firms have only one plant. Thus, the paper will refer to plants and firms interchangeable.

  4. Most of the plants with foreign ownership have actually majority foreign ownership (over 50 % foreign ownership).

  5. Total factor productivity is measured as the residual of a regression that estimates a Cobb–Douglas production function for each 3-digit industry using the method proposed by Olley and Pakes (1996) and later modified by Levinsohn and Petrin (2003), which corrects the simultaneity bias associated with the fact that productivity is not observed by the econometrician but it may be observed by the firm. In some cases, the production functions were estimated at the 2-digit level due to the small number of observations of some industries at the 3-digit level of disaggregation.

  6. See, for example, Roberts and Tybout (1997), Castellani (2002), Bernard and Jensen (2004), and Greenaway, et al. (2007).

  7. These marginal effects consider the results of column (4) in Table 3 and only the parameters that are statistically significant. In this case, the marginal effects are evaluated at the average of the variable foreign ownership. Given that the econometric results are very similar to those in Table 4 we do not present the effects corresponding to those results.

  8. The high and low financially dependent industries are classified as in the previous exercise. In this case, the marginal effects are evaluated at the average of TFP.


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We would like to thank Rolando Campusano for excellent research assistance, and two anonymous referees and participants at the 6th Workshop of the International Study Group on Exports and Productivity (ISGEP) held at Leuphana University, Lüneburg, Germany, on September 28–30, 2011 for helpful comments on an earlier version of this paper. Alvarez thanks also the Millennium Science Initiative (Project NS 100017 “Centro Intelis”) for their financial support.

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Correspondence to Ricardo A. López.

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Alvarez, R., López, R.A. Financial development, exporting and firm heterogeneity in Chile. Rev World Econ 149, 183–207 (2013).

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