Topological multiple recurrence for polynomial configurations in ...

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• exposé

XPEH-TEX Topological multiple recurrence for polynomial configurations in nilpotent groups V. Bergelson, A. Leibman Abstract We establish a general multiple recurrence theorem for an action of a nilpotent group by homeomorphisms of a compact space. This theorem can be viewed as a nilpotent version of our recent polynomial Hales-Jewett theorem ([BL2]) and contains nilpotent extensions of many known “abelian” results as special cases. 0. Introduction 0.1.

• van
• accordance with the principles of ramsey theory
• monomial mappings
• nilpotent group
• polynomial mapping
• finite coloring
• nilpotent group of self-homeomorphisms
• metric space
• theorem

Sujets

• Exposé
• Graham
• Theorem
• Polynomial
• Finite
• Nilpotent
• Homeomorphism
• Monomial
• Ramsey

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• Publié par: edwui
• Nombre de lectures: 15
• Langue: English

Extrait

Credit Constraints in Trade:

Financial development
and export composition


Kalina Manova
Harvard University

First draft: Feb 23, 2005
This draft: Nov 25, 2005






Abstract. Traditional explanations of export composition focus on comparative advantage arising
from relative factor endowments and production technologies. This paper provides evidence of an
additional comparative advantage channel based on the level of financial development. I argue that
potential exporters face borrowing constraints and that their capacity to enter an industry depends
on the sector’s asset structure and reliance on external financing. I find that countries with better-
developed financial systems tend to export relatively more in highly external capital dependent
industries and in sectors with fewer tangible assets that can serve as collateral. I establish causality
in a panel of 107 countries and 27 industries in 1985-1995, and isolate a financial channel
independent of other institutions, factor endowments, or the overall level of development. I also
find that equity market liberalizations increase exports disproportionately more for sectors more
reliant on outside funding or characterized by softer assets. This effect is more pronounced in
countries with initially less active stock markets, suggesting that foreign equity flows may
substitute for an underdeveloped domestic financial system.


_____________________
I thank Pol Antras, Elhanan Helpman, and Marc Melitz for their invaluable guidance. I also thank
Philippe Aghion, Davin Chor, Gita Gopinath, Dirk Jenter and Nathan Nunn for insightful
conversations, and the participants of the Harvard International Lunch for helpful comments.
1. Introduction
The standard Heckscher-Ohlin model predicts that a country rich in labor, natural resources,
physical or human capital has a comparative advantage in goods intensive in the abundant input
factors. This view abstracts from market frictions that may arise from agency problems, and
presumes that entrepreneurs can enter any industry regardless of its need for outside finance or
endowment of collaterizable assets. In the presence of financial frictions, however, borrowing
constraints will vary across industries and affect the sectoral composition of a country’s exports by
limiting the investment opportunities open to producers with insufficient private capital.
A small but growing literature on finance and trade has indeed found suggestive evidence of
an additional comparative advantage channel based on the level of financial development. In
particular, a number of papers have argued that financially developed countries export relatively
more in sectors that require more outside finance. However, the cross-sectional approach and
focus on worldwide exports by sector in these studies has made it difficult to establish a causal
link from finance to growth. Moreover, the financial channel has been confounded with the effects
of other institutions, making the results difficult to interpret.
This paper exploits the time dimension in a panel of bilateral exports by sector and examines
the effects of equity market liberalizations on trade to address these concerns. I show that
countries with better-developed financial systems tend to export relatively more in highly external
capital dependent industries and in sectors with few tangible assets that can serve as collateral.
This result is not driven by factor endowments or the overall level of development. I establish
causality by using lagged values of financial development in a country-fixed-effects regression
with an annual panel of 107 countries and 27 industries in 1985-1995. To isolate an independent
financial channel I carefully control for the effects of other institutions in both the exporting and
the importing country. I also consider the impact of an exogenous shock to the availability of
outside finance, which is arguably orthogonal to other institutional developments: equity market
liberalizations. I find that liberalizations increase exports disproportionately more in sectors
intensive in external finance and with softer assets. Moreover, this effect is more pronounced in
countries with initially less active stock markets, suggesting that foreign equity flows may
substitute for an underdeveloped domestic financial system.
These findings contribute to the recent empirical literature on the role of financial institutions
for trade. For example, in a cross-section of 56 countries and 36 industries, Beck (2003) finds that
1
the average 1980-1990 export share of industries that use more outside funds is higher in
financially developed countries. In another cross-sectional analysis for 1995, Becker and
Greenberg (2004) reach a similar conclusion using different industry measures of fixed upfront
1costs. Similarly, Hur et al. (2004) show that a better financial environment (as well as many other
institutions) is associated with a larger 1980-1990 average share of exports in sectors with fewer
internal funds and hard assets.
A weakness of all prior studies is that they present cross-sectional analyses of worldwide
exports by sector, which exposes the results to reverse causality. To address this concern
researchers have instrumented for private credit with legal origin. (Private credit is the most
commonly used measure of financial development and is also my main measure.) However, legal
origin has been shown to impact institution formation and the economy more broadly, which in
2turn are likely to affect sectors and sectoral exports differentially. It is thus not obvious that this
instrument meets the exclusion restriction. In contrast, my annual panel allows me to exploit the
variation in the level of financial development over time by using lagged values of private credit to
explain current export flows. My results remain unchanged or stronger when I hold private credit
fixed at its value immediately before 1985 (the first year in the sample) or use moving lagged 5-
year averages. Since lagged measures of financial development are not contaminated by current
exports, these findings constitute more conclusive evidence of a causal link from financial
development to export composition than has been previously shown. Moreover, I show that
instrumenting with legal origin and creditor rights protection produces higher coefficient point
estimates, which may reflect the role of other variables that covary with the instruments.
The prior literature has also confounded the effects of financial development with those of
other institutions. Establishing a separate role for financial development is problematic because it
tends to be highly correlated with many desirable institutional features. While some of the above
studies use indices such as accounting standards and creditor and property rights protection, they
never include them in the same regression as financial development. Instead, they interpret the
institutional results as robustness checks for the estimation with private credit. This is justified to
the extent that these characteristics are related to the ability to raise capital.

1
Svaleryd and Vlachos (2005) find similar results by constructing an index of industrial specialization.
2
La Porta et al. (1997) find that legal origin is a strong predictor of current financial development, measured by either
total credit to the private sector or stock market capitalization. However, La Porta et al. (1998) show that legal origin
also predicts the level of rule of law, corruption, the efficiency of the judiciary, the risk of expropriation, and the
repudiation of contracts by the government.
2
Institutions, however, may affect exports through at least two other channels. In particular,
recent papers have highlighted the role of institutions in alleviating hold-up problems in the
production process. For example, Nunn (2005) develops an incomplete-contracts model of
relationship-specific investments and finds that countries with better contract enforcement have a
comparative advantage in industries intensive in such investments. Similarly, Levchenko (2004)
and Claessens and Laeven (2003) show that property rights protection and the rule of law affect
the composition of trade. Secondly, institutions in both the exporting and the importing country
may matter for trade negotiations. For instance, quality control or trade agreements may be more
difficult to establish in some industries, making them more dependent on the level of contract
enforcement in both partner countries.
In contrast to the prior literature, I establish an independent financial channel using three
different approaches. First, I include institutional controls directly in the regressions together with
private credit. This addresses the concern that institutions play a non-financial role in the
production process. The results survive this test. Second, the bilateral nature of my panel allows
me to test whether private credit proxies not only for financial contractibility, but for a contractual
environment in general which is conducive to trade negotiations and more exports. If so, then both
the exporter’s and the importer’s level of financial de