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Export Credit Gurantees, Moral Hazard and Exports Quality

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  • Maria del Carmen Garcia-Alonso
  • Paul Levine
  • Antonia Morga

Abstract

We analyse the role played by Export Credit Guarantees (ECGs) to encourage exports to developing countries. The existence of moral hazard on the side of the firm is introduced. We show that the inability of the exporter's government to verify the actual quality of the product will limit its ability to encourage trade through ECGs, once the coverage provided goes beyond a certain threshold. This result provides a rationale behind the limited coverage on ECGs.

Suggested Citation

  • Maria del Carmen Garcia-Alonso & Paul Levine & Antonia Morga, 2004. "Export Credit Gurantees, Moral Hazard and Exports Quality," Studies in Economics 0402, School of Economics, University of Kent.
    • Handle: RePEc:ukc:ukcedp:0402
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    References listed on IDEAS

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    7. Laffont, Jean-Jacques, 2001. "Incentives and Political Economy," OUP Catalogue, Oxford University Press, number 9780199248681.
    8. Becker, Gary S., 1982. "Competition Among Pressure Groups for Political Influence," Working Papers 23, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
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    Cited by:

    1. Ali Polat & Mehmet Yesilyaprak, 2017. "Export Credit Insurance and Export Performance: An Empirical Gravity Analysis for Turkey," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(8), pages 12-24, August.
    2. Canh Phuc Nguyen & Thanh Dinh Su, 2021. "Export quality dynamics: Multidimensional evidence of financial development," The World Economy, Wiley Blackwell, vol. 44(8), pages 2319-2343, August.
    3. Andreas Klasen, 2014. "Export Credit Guarantees and the Demand for Insurance," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 15(03), pages 26-33, August.
    4. Gangopadhyay Partha, 2014. "A Formal Model of Arms Market with Cash-for-Favours," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 20(3), pages 411-428, August.
    5. Soumaré, Issouf & Lai, Van Son, 2016. "An analysis of government loan guarantees and direct investment through public-private partnerships," Economic Modelling, Elsevier, vol. 59(C), pages 508-519.
    6. Ha, Le Thanh, 2023. "The role of financial development in enhancing trades in environmental goods: International insights from 119 countries," Journal of Commodity Markets, Elsevier, vol. 29(C).

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    More about this item

    Keywords

    export credit guarantees; offsets; moral hazard;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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