This paper studies the role of financial frictions as a barrier to international trade. We investigate new exporter dynamics in order to identify the extent to which these frictions affect export decisions. We study an economy with heterogeneous firms subject to financing constraints and working...

We show, in a very plausible theoretical setting, that control function estimators (CFEs) of firm production function, such as Olley-Pakes, may be biased. The bias will occur, in particular, when investments respond differently to short- and long-lasting changes in productivity. We modify the...

We generalize permissibility (Brandenburger, 1992) to allow for any suitably defined model of preference and definition of possibility. We also prove that the generalized solution concept characterizes rationality, caution, and “common belief" of rationality and caution.