CREDIT CONSTRAINTS, ENDOGENOUS INNOVATIONS, AND PRICE SETTING IN INTERNATIONAL TRADE

This paper analyzes the role of credit frictions in a trade model where producers differ their capabilities to conduct process and quality innovations require external finance for investments. Accounting cost-based quality-based sorting firms unified framework allows us demonstrate that reactions prices commonly used productivity measures do not necessarily reflect welfare implications. Credit lead distortions through aggravated access endogenous price adjustments so responses quantity-based revenue-based substantially. In counterfactual scenarios, we show these differential effects are quantitatively important. article is protected by copyright. All rights reserved