This paper presents theory and evidence that tighter credit constrains force firms to produce lower quality. The paper develops a quality sorting model that predicts that tighter credit constraints faced by a firm reduce its optimal prices due to its choice of lower-quality products. Conversely,...

This paper presents theory and evidence from highly disaggregated Chinese data that tighter credit constrains force firms to produce lower quality. The paper modifies Melitz's (2003) model of trade with heterogeneous firms by introducing quality choice and credit constraints. The quality sorting...

This paper presents theory and evidence that tighter credit constrains force firms to produce lower quality. The paper develops a quality sorting model that predicts that tighter credit constraints faced by a firm reduce its optimal prices due to its choice of lower-quality products. Conversely,...

This paper presents theory and evidence from highly disaggregated Chinese data that tighter credit constrains force firms to produce lower quality. The paper modifies Melitz's (2003) model of trade with heterogeneous firms by introducing quality choice and credit constraints. The quality sorting...