Foreign trade financing policies - a microeconomic evaluation

For many companies, especially smaller ones, international business can be risky - companies don't know if the foreign buyer will pay. Therefore, countries often offer government support in the form of insurance and loans. Globally, 10% of world exports were insured in 2014, equivalent to USD 1.9 trillion - a more than 50% increase compared to the beginning of the financial crisis. For Sweden, outstanding insurance and loans amounted to SEK 400 billion. Despite the scale of the interventions, research is very limited due to a lack of data. Swedish support has never been analyzed. We have gained access to uniquely detailed data that makes it possible for the first time to analyze the effects of government interventions on the internationalization and growth of Swedish companies over time. For the small and open Swedish economy, knowledge of the potential effects of the aid is particularly important. Based on our theoretical model, we quantify the effects on firms' internationalization, integration into global production networks, jobs and growth. The aim is to contribute to a deeper understanding of the complex role of government interventions. With this new knowledge, policy makers and authorities in the field are expected to have a much more solid basis for deciding on the design of financial support to achieve growth and internationalization objectives. In turn, businesses are expected to benefit practically from new knowledge on how to finance their foreign trade.