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Ethnic Ties and the Provision of Credit: Relationship-Level Evidence from African Firms

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Author Info
Raymond Fisman (Columbia University GSB)
Abstract

This paper studies the effect of ethnic ties on trade credit provision. Previous work in Africa has found that entrepreneurs of Asian and European descent are more likely to obtain credit from their suppliers. However, since these analyses use firm-level data, one cannot distinguish the effect of community ties from that of unobserved firm quality that is correlated with the owner's ethnic background. Using data on specific supplier relationships of African firms, this paper more directly examines the effect of ethnic ties on trade credit provision. Results from random and fixed-effects models indicate that firms are twice as likely to obtain credit from suppliers from within the owners' ethnic communities as from outsiders, suggestive of a very strong effect of communal ties. However, these ties accounts for only a small proportion (15 percent) of the overall preferential credit access enjoyed by entrepreneurs of non-African descent.

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Publisher Info
Article provided by Berkeley Electronic Press in its journal Advances in Economic Analysis & Policy.

Volume (Year): 3 (2003)
Issue (Month): 1 ()
Pages: 1211-1211
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Related research
Keywords: Trade Credit Ethnicity

Find related papers by JEL classification:
L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Fafchamps, Marcel, 2000. "Ethnicity and credit in African manufacturing," Journal of Development Economics, Elsevier, vol. 61(1), pages 205-235, February. [Downloadable!] (restricted)
  2. Marcel Fafchamps, 2002. "Returns to social network capital among traders," Oxford Economic Papers, Oxford University Press, vol. 54(2), pages 173-206, April.
  3. Fafchamps, Marcel, 1997. "Trade credit in Zimbabwean manufacturing," World Development, Elsevier, vol. 25(5), pages 795-815, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Marcel Fafchamps & Marco J. van der Leij & Sanjeev Goyal, 2006. "Scientific Networks and Co-authorship," Economics Series Working Papers 256, University of Oxford, Department of Economics. [Downloadable!]
  2. Sanjeev Goyal & Marcel Fafchamps & Marco J. van der Leij, 2006. "Matching and Network Effects," Economics Discussion Papers 611, University of Essex, Department of Economics. [Downloadable!]
  3. Alberto Alesina & Eliana La Ferrara, 2004. "Ethnic Diversity and Economic Performance," NBER Working Papers 10313, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Bigsten, Arne & Soderbom, Mans, 2005. "What have we learned from a decade of manufacturing enterprise surveys in Africa ?," Policy Research Working Paper Series 3798, The World Bank. [Downloadable!]
    Other versions:
  5. Raymond Fisman & Mayank Raturi, 2003. "Does Competition Encourage Credit Provision? Evidence from African Trade Credit Relationships," NBER Working Papers 9659, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Marcel Fafchamps & Flore Gubert, 2005. "The Formation of Risk Sharing Networks," Working Papers DT/2005/13, DIAL (Développement, Institutions & Analyses de Long terme). [Downloadable!]
    Other versions:
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