Credit-constrained firms in the global economy: Implications for competition, welfare, and inequality

• Applicant: Professor Dr. Tobias Seidel
• Subject Area: Economic Theory ; Statistics and Econometrics
• Term: from 2014 to 2017
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 246216578

Financial market development facilitates access to external finance for firms. The international trade literature has so far focused on the effects of credit constraints for the volume and the pattern of international trade, but not on the implications for competition, welfare, and inequality. These are the main aspects of this research project.For each of these three aspects, we can identify three main goals:1. Theoretical models should identify key economic channels to better understand the nexus between financial market development (credit constraints) and competition, welfare, and inequality.2. Theoretical models should be quantified by means of structural estimation. We thereby obtain answers to questions like: How large are the competition and welfare effects of credit constraints? By how much is the distribution of income affected?3. As financial markets have substantial implications for the real economy, there is a lot of public interest in these issues. The project should therefore contribute to the policy debate by identifying several policy implications associated with the various economic channels.

• DFG Programme: Research Grants
• International Connection: Switzerland
• Participating Persons: Professor Dr. Peter Egger; Dr. Sergey Nigai