Credit constraints and trade performance: Does trust-based social capital matter?
Gideon Ndubuisi & Maty Konte
It has been extensively argued that trust-based social capital expands
access to credit. We embed this argument in the "credit-constrained
literature," which documents inter-sector differences in financial
vulnerability. We argue that financially constrained sectors are
relatively better off in countries with a higher social trust level.
Employing bilateral trade data comprising 50 countries' exports in 27
sectors during 1996-2008, we find that countries with a higher social
trust level export more in financially vulnerable sectors because they
export more products to each destination (extensive margin) and sell
more of each product (intensive margin), which is in line with our
hypothesis. With the exception of the intensive margin, these results
are robust to a battery of sensitivity checks, including controlling for
Keywords: Social Trust, Trade, Trade Margins, Credit Constraints
JEL Classification: F10, F14, D70