all countries with more than 10 industries in this situation are developed countries. Nevertheless, there are three reasons to believe this assumption is unlikely to affect importantly the results. First, available evidence suggests that the relative use of trade credit across industries is to an important degree technologically determined. The ratios computed for industries with more than 20 firms in a country are significantly correlated with the ratios computed for the U.S.; the coefficient of a regression of the available country-level ratios against the US ratios results is 0.92, significant at the 1 percent level. Second, to the extent that this assumption introduces classical measurement error to the measure of the use of trade credit at the country-industry level, it will result on a downward bias on the coefficient of interest that can be substantial (see appendix). Finally, using the available data to estimate the use of trade credit at the country-industry level produces similar results to those obtained under the assumption of constant relative ratios (see section 6).

Another potentially important concern is that both data sources (Worldscope and Compustat) contain only information of publicly listed companies. If these companies’ use of trade credit is different from that of the rest of the firms the estimates of the overall use of trade credit in a country will be biased. This is possible because public firms tend to be larger than private ones, and the use of trade credit is likely to depend on a firm’s size. Nevertheless, as long as the variation in the use of trade credit _across countries_ is mainly determined by those countries’ structural characteristics the bias induced by the use of public companies will affect mainly the level of the measures but not their relative position across countries. On a more pragmatic note, to my knowledge there are no better comprehensive data sources available.

The measures of _Payables Financing_ ( _P_ ) and _Short Term Debt to Payables_ ( _S_ ) for the sample countries are presented in Table 1. The sample includes 43 countries; 22 developed, and 21 developing ones (including 3 low income). The most represented regions are Western Europe, with 15 countries, followed by East Asia and Pacific with 10, and the least represented are Sub-Saharan Africa, South Asia, and North America, with only two countries each. The main constraint to the sample is the availability of data on the use of trade credit; only for ten countries trade credit data is available but not the correlation data described below.<sup>7</sup> Column (3) indicates whether the measures of trade credit were built using data only from manufacturing firms (quality 1) or from the whole corporate sector (quality 2). In most cases (36 countries) there were enough manufacturing firms (10 firms) with more than five years of data to build the manufacturing specific measure, but in a few cases with less than this number non-manufacturing firms were also included in the measure. Nevertheless, all the results we discuss below carry to the subsample of high quality countries (see section 6).

Firms in the average sample country finance about 15 percent of inputs’ cost with trade credit (see the mean value at the bottom of column (1)). The distribution of this ratio across countries is symmetric around this mean and there is a reasonable degree of variation that puts the 25th and 75th percentiles at 12 and 18 percent. The typical country also uses intermediary and supplier’s

> 7These countries are Argentina, Brazil, Czech Republic, New Zealand, Pakistan, Russia, Switzerland, Slovakia, Slovenia, and Thailand. The main reason why these countries are excluded is that they do not count with 15 observations of the growth rate during 1980-2003 to construct the correlation matrices.

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