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Financial liberalization may have a positive effect on growth not only through the increase in the quantity of the available funds, but also through a more efficient allocation of resources across firms and sectors. Despite this intuitive appeal, there is little empirical evidence on the positive effect of financial liberalization on capital allocation. The main difficulty of investigating the linkage between liberalization of financial markets and capital allocation efficiency lies in the fact that the efficiency of capital allocation is not directly observable. One way to address this issue is to evaluate the effect of financial liberalization within the Heckscher-Ohlin framework. Producing and exporting products inconsistent with a country's factor endowments constitutes a serious misallocation of the funds, which undermines competitiveness of the economy and inhibits its long run growth. This paper tests the allocative efficiency hypothesis by evaluating the effect of stock market liberalization on the survival of different product categories using export data for 91 countries over the period of 1975-2003. Preliminary results suggest that after liberalization of the domestic stock market, products employing intensively scarce factors exit at a relatively higher rate from a country's export portfolio. In other words, following liberalization episodes, a country tends to rebalance its export portfolio towards products consistent with its factor's endowments.

Capital Allocation --- Currencies and Exchange Rates --- Debt Markets --- Economic Theory & Research --- Emerging Markets --- Equity Market Liberalization --- Financial Liberalization --- International Economics & Trade --- International Trade --- Macroeconomics and Economic Growth --- Markets and Market Access --- Poverty Reduction

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Zonder onderwerpscode: economie

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This paper explores the evolution of OECD imports over time and as a function of income levels, measuring the concentration of those imports across origin countries at the product level. The authors find evidence of diversification followed, in the last years of the sample period (post-2000), by a slight re-concentration. This re-concentration is entirely explained by the growing importance of Chinese products in OECD imports. They also find evidence of relatively more volatile concentration levels for differentiated goods, consistent with a simple model of adverse selection and screening of suppliers by OECD buyers. Finally, they find that "accession" to OECD markets occurs directly (rather than after acquiring prior export experience on other markets) for more than half of the (extra-OECD) exporter/product pairs, but that one to eight years of experience enhances subsequent survival on OECD markets. Exports that reach OECD markets after more than eight years of experience elsewhere tend to survive less.

Adverse selection --- Barriers to entry --- Contestability --- Debt Markets --- Economic Theory & Research --- Emerging markets --- Export growth --- Exports --- Externalities --- Finance and Financial Sector Development --- Income --- Income levels --- International Trade --- Labor Policies --- Macroeconomics and Economic Growth --- Market Entry --- Market share --- Markets and Market Access --- Microfinance --- Monopoly --- Monopoly price --- Product quality --- Social Protections and Labor --- Substitution --- Supplier --- Suppliers --- Supply chains --- Volatility

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This paper explores the evolution of OECD imports over time and as a function of income levels, measuring the concentration of those imports across origin countries at the product level. The authors find evidence of diversification followed, in the last years of the sample period (post-2000), by a slight re-concentration. This re-concentration is entirely explained by the growing importance of Chinese products in OECD imports. They also find evidence of relatively more volatile concentration levels for differentiated goods, consistent with a simple model of adverse selection and screening of suppliers by OECD buyers. Finally, they find that "accession" to OECD markets occurs directly (rather than after acquiring prior export experience on other markets) for more than half of the (extra-OECD) exporter/product pairs, but that one to eight years of experience enhances subsequent survival on OECD markets. Exports that reach OECD markets after more than eight years of experience elsewhere tend to survive less.

Adverse selection --- Barriers to entry --- Contestability --- Debt Markets --- Economic Theory & Research --- Emerging markets --- Export growth --- Exports --- Externalities --- Finance and Financial Sector Development --- Income --- Income levels --- International Trade --- Labor Policies --- Macroeconomics and Economic Growth --- Market Entry --- Market share --- Markets and Market Access --- Microfinance --- Monopoly --- Monopoly price --- Product quality --- Social Protections and Labor --- Substitution --- Supplier --- Suppliers --- Supply chains --- Volatility

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The authors show that exported products exit the US market sooner if they violate the Heckscher-Ohlin notion of comparative advantage. Crucially, this pattern is stronger when exporting country has a well-developed banking system, measured by a high ratio of bank credit over the GDP. Banks thus push firms away from exports that are facing an uphill battle on a competitive foreign market due to a suboptimal use of the domestic factor endowment. The results imply a disciplining role for bank credit in terminating inefficient trade flows. This constitutes a new channel through which finance improves resource allocation in the real economy.

Equality.