Trade Liberalization Boosts Efficiency for Firms Facing Credit Constraints
The article explores how differences in access to credit can impact international trade patterns. In a model where firms need to borrow to produce goods, countries can benefit from trade even without traditional comparative advantages. Firms with strong cash flow are more likely to enter credit-intensive sectors, with weaker firms opting for fragmentation and richer firms choosing vertical integration. The study suggests that fragmentation in trade can lead to greater efficiency when credit constraints are present.