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Payment choice in international trade: theory and evidence from cross-country firm-level data

Hoefele, Andreas; Schmidt-Eisenlohr, Tim; Yu, Zhihong

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Authors

Andreas Hoefele

Tim Schmidt-Eisenlohr

ZHIHONG YU ZHIHONG.YU@NOTTINGHAM.AC.UK
Associate Professor



Abstract

When trading across borders, firms choose between different payment contracts. Theoretically, this should allow firms to trade-off differences in financing costs and enforcement across countries. This paper provides evidence for this hypothesis employing firm-level data from a large number of developing countries. As predicted, international transactions are more likely paid after delivery when financing costs in the source country are high and when contract enforcement is low. We extend the theory and also show empirically that the more complex an industry is, the more important is contract enforcement and the less important are financing costs for the contract choice.

Citation

Hoefele, A., Schmidt-Eisenlohr, T., & Yu, Z. (in press). Payment choice in international trade: theory and evidence from cross-country firm-level data. Canadian Journal of Economics / Revue Canadienne d'Économique, 49(1), 296-319. https://doi.org/10.1111/caje.12198

Journal Article Type Article
Acceptance Date May 6, 2015
Online Publication Date Sep 12, 2016
Deposit Date Jun 30, 2016
Publicly Available Date Sep 13, 2018
Journal Canadian Journal of Economics
Print ISSN 0008-4085
Electronic ISSN 1540-5982
Publisher Wiley
Peer Reviewed Peer Reviewed
Volume 49
Issue 1
Pages 296-319
DOI https://doi.org/10.1111/caje.12198
Keywords trade finance, payment contracts, industry complexity, developing countries, trade intermediation
Public URL https://nottingham-repository.worktribe.com/output/752501
Related Public URLs http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1540-5982/
Additional Information This is the peer reviewed version of the following article: Hoefele, A., Schmidt‐Eisenlohr, T. and Yu, Z. (2016), Payment choice in international trade: Theory and evidence from cross‐country firm‐level data. Canadian Journal of Economics/Revue canadienne d'économique, 49: 296-319, which has been published in final form at https://onlinelibrary.wiley.com/doi/abs/10.1111/caje.12198. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
Contract Date Jun 30, 2016

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