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Title: |
Entrepreneurial Selection, Financial Markets, and Patterns of
International Trade |
| Author: |
Xu, Bin |
| Author
Affiliation: |
U FL |
| Source: |
International Economic Journal, Autumn 2001, v. 15, no. 3, pp. 147-167 |
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Publication Date: |
Autumn 2001 |
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Abstract: |
This paper introduces entrepreneurial
selection and imperfect financial markets to the 2 x 2 x 2 model of
international trade. Entrepreneurs are heterogeneous in ability and
borrow from banks who do not observe their ability. The pattern of
international trade depends on (1) factor abundance, (2) endogenously
determined productivity, and (3) endogenously determined financial
market imperfections. We show that entrepreneurial selection results in
a diminished Rybczynski effect and financial market imperfections
further reduce the effect; hence differences in capital abundance imply
a smaller trade volume than predicted by the Heckscher-Ohlin theorem.
The results help to resolve a conflict between the Heckscher-Ohlin model
and data. |
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