Econometrica: Aug, 1969, Volume 37, Issue 3

The Determinants of Trade Credit in the U.S. Total Manufacturing Sector

https://doi.org/0012-9682(196908)37:3<408:TDOTCI>2.0.CO;2-9
p. 408-423

M. I. Nadiri

This paper estimates a model specifying the determinants of trade credit in the United States total manufacturing sector for the postwar period. Trade credit is considered as a selling expense, like advertising outlays. Its determinants are derived from a profit maximization model in which the price, volume of output, and the selling costs are all variables to be jointly determined. The opportunity or user cost of accounts receivable and accounts payable are specified and the response of these accounts as well as net trade credit to changes in various monetary decision variables is examined.