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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

Authors

Andreas Hoefele ahoefele@gmail.com

Tim Schmidt-Eisenlohr t.schmidteisenlohr@gmail.com

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.

Journal Article Type Article
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
APA6 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. doi:10.1111/caje.12198
DOI https://doi.org/10.1111/caje.12198
Keywords trade finance, payment contracts, industry complexity, developing countries, trade intermediation
Related Public URLs http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1540-5982/
Copyright Statement Copyright information regarding this work can be found at the following address: http://eprints.nottingh.../end_user_agreement.pdf
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.w...abs/10.1111/caje.12198. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.

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Copyright Statement
Copyright information regarding this work can be found at the following address: http://eprints.nottingham.ac.uk/end_user_agreement.pdf





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