Scandinavian Working Papers in Economics

Ratio Working Papers,
The Ratio Institute

No 316: Mitigating Information Frictions in Trade: Evidence from Export Credit Guarantees

Magnus Lodefalk (), Aili Tangz Sofia Tano (), Natasha Agarwal () and Zheng Wang ()
Additional contact information
Magnus Lodefalk: The Ratio Institute, Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden
Aili Tangz Sofia Tano: Örebro University
Natasha Agarwal: World Education Foundation
Zheng Wang: University of Nottingham

Abstract: Information frictions make non-simultaneous exchange risky, particularly across borders. Therefore, many countries insure cross-border exchange. We investigate the effects on firm trade, jobs, value added and productivity, using uniquely detailed, comprehensive and longitudinal transaction-level Swedish data on insurance and granular data on exporters and foreign buyers. For identification, we employ matching and differencein- difference and fuzzy regression discontinuity estimators and exploit a quasi-natural experiment. We find strikingly heterogeneous effects across firm size and response variables. The strongest positive effects are for small traders and new users. Overall, the evidence suggests a causal link from export insurance to firm performance.

Keywords: Information friction; Institutions; Export insurance; Credit Constraints; Trade; Firm Performance

JEL-codes: D22; F14; F36; G28; G32; H81; L25

66 pages, First version: December 27, 2018. Revised: April 23, 2021. Earlier revisions: November 13, 2019, April 23, 2021.

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