IDEAS home Printed from https://ideas.repec.org/a/wsi/gejxxx/v21y2021i01ns2194565921500044.html
   My bibliography  Save this article

Investment Liberalization, Credit Constraints, And International Trade

Author

Listed:
  • TINGTING XIONG

    (Department of Economics, Howard University, 2400 6th Street NW ASB-B Room 314, Washington, DC 20059, USA)

  • HAO SUN

    (#x2020;Department of Government and Public Affairs, School of Civic Leadership, Business and Social Change, Gallaudet University, USA)

Abstract

This paper investigates the effect of bilateral investment treaties (BITs) on the extensive and intensive product margins of exports in sectors with different credit constraints. The model in this paper demonstrates that such investment liberalization increases the extensive product margin by lowering the variable costs of selling abroad, while it decreases the intensive product margin by lowering both the fixed investment costs and the variable costs. Moreover, the effects of investment liberalization are stronger in financially more vulnerable sectors. Using a detailed dataset of 190 countries and 27 manufacturing sectors from 1988 to 2006, this paper furnishes robust evidence that BITs increase the extensive margin of exports from developed countries and decrease the intensive margin of exports. It further shows that BITs decrease the intensive margin of exports from developed countries more in the sectors that are more dependent on external finance. Similarly, the intensive margin of exports from developed countries in low tangibility sectors falls by 11.81% because of BITs, while the intensive margin in high tangibility sectors is quite stable with BITs.

Suggested Citation

  • Tingting Xiong & Hao Sun, 2021. "Investment Liberalization, Credit Constraints, And International Trade," Global Economy Journal (GEJ), World Scientific Publishing Co. Pte. Ltd., vol. 21(01), pages 1-46, March.
    • Handle: RePEc:wsi:gejxxx:v:21:y:2021:i:01:n:s2194565921500044
    DOI: 10.1142/S2194565921500044
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S2194565921500044
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S2194565921500044?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tingting Xiong, 2024. "Bilateral investment treaty, technological intensity, and international trade," International Economics and Economic Policy, Springer, vol. 21(2), pages 411-434, May.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:gejxxx:v:21:y:2021:i:01:n:s2194565921500044. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: https://www.worldscientific.com/worldscinet/gej .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.