Export quality upgrading and credit constraints

Abstract

This paper investigates on the impact of credit constraints on exported-output quality upgrading by small and medium manufacturing …rms (SMEs). Italian SMEs strongly rely on the local banking system to …nance their trade costs as well as their production costs. When credit available in the market is reduced, as happened during the current economic crisis, less productive …rms have less funds available to upgrade the quality of exported-output. The empirical investigation, based on a survey of Italian …rms, ran in 2011, con…rms that credit constrained …rms are are less likely to increase output quality for the export market. The impact of credit constraints on export quality-upgrading is stronger for …rms exporting outside Europe and on medium-sized …rms. Credit constraints impact on trade not only at the extensive margin but also at the intensive margin.